UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2

FORM 10-Q/A

(MarkOne)

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

For the quarterly period ended June 30, 2010

¨ 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 83668489

 (Registrant’stelephone number, including area code)

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

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

Yes x   No ¨

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post suchfiles).    Yes    ¨   No   ¨

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer”, “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ¨   No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

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

APPLICABLE ONLY TO CORPORATE ISSUERS

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

As of August 6, 2010, there are 19,898,229 shares of $0.001 par value common stock issued and outstanding.

Explanatory Note

In this Amendment No. 2 to Quarterly Report on Form 10-Q (the "Form 10-Q/A"), we refer to Universal Travel Group, a Nevada corporation, as "we," "us," "our" or "our company."

Subsequent to filing our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 on August 10, 2010, we discovered that we had erroneously placed cost of service of one of subsidary from Air ticketing segment into tours segment. We are amending Note 13 and certain disclosures in our MD&A upon review and approval from our auditor.

Other than the correction of the error described above, all other information in our original Form 10-Q remains unchanged. For the convenience of the reader, this amendment includes, in their entirety, those items in our original filing not being amended. Except for the amendment, this Form 10-Q/A continues to describe conditions as of our original filing, and does not update disclosures contained herein to reflect events that occurred at a later date. Accordingly, this Form 10-Q/A should be read in conjunction with our other filings made with the SEC subsequent to the filing of our Report, if any.

FORM10-Q/A

.UNIVERSALTRAVEL GROUP

INDEX

		Page
PART I.	Financial Information	1
	Item 1.  Financial Statements (Unaudited)	1
	Report of  Independent Registered Public AccountingFirm	2
	Consolidated Balance Sheets as of  June 30, 2010 (Unaudited) and December 31, 2009	4
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2010 and 2009 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (Unaudited)	7
	Consolidated Statements of Stockholders' Equity	8
	Notes to Consolidated Financial Statements as of  June 30, 2010 (Unaudited)	9
	Item 2.  Management’s Discussion and Analysis of Financial Condition or Plan of Operation	41
	Item 3.  Quantitative and Qualitative Disclosures About Market Risk.	52
	Item 4.  Controls and Procedures	52
PART II.	Other Information	53
	Item 1.  Legal Proceedings	53
	Item 1A. Risk Factors.	53
	Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	53
	Item 3.  Defaults Upon Senior Securities	53
	Item 4.  (Removed and Reserved).	53
	Item 5.  Other Information	53
	Item 6.  Exhibits	53

PARTI - FINANCIAL INFORMATION

Item1. Financial Statements (Unaudited)

UNIVERSAL TRAVEL GROUP

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

1

ACSB Acquavella, Chiarelli, Shuster, Berkower & Co., LLP

517 Route one	1 Penn Plaza
Iselin, New Jersey, 08830	36the Floor
732.855.9600	New York, NY 10119

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Universal Travel Group

We have reviewed the accompanying balance sheet of Universal Travel Group. (the “Company”) as of June 30, 2010, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for the six-month period ended June 30, 2010. These financial statements are the responsibility of the company’s management.

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

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

We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2009 and the related consolidated statements of income, retained earnings and comprehensive income, and consolidated statement of cash flows for the year then ended; and in our report dated February 22, 2010, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

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

Certified Public Accountant

New York, N.Y.

August 10, 2010

2

TABLE OF CONTENTS

Consolidated Balance Sheets	4
Consolidated Statements of Income	5-6
Consolidated Statements of Cash Flows	7
Consolidated Statements of Stockholders’ Equity	8
Notes to Consolidated Financial Statements	9-40

3

UNIVERSAL TRAVEL GROUP

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2010 AND DECEMBER 31, 2009

	6/30/2010		12/31/2009
			Restated
ASSETS
Cash and cash equivalents	$	43,591,459	$	36,677,422
Accounts receivable, net		19,555,646		17,321,174
Other receivables and deposits, net		2,127,552		257,907
Due from related party		6,986,717		-
Trade deposit		7,706,484		9,775,735
Advances		-		440,063
Prepayments		2,389,960		216,727
Note receivable		227,182		1,711,392
Acquisition Deposits		3,599,530		4,077,921
Total Current Assets		86,184,529		70,478,341
Property, plant & equipment, net		6,487,219		4,992,677
Intangible assets		3,320,478		339,240
Goodwill		24,812,040		9,896,270
Total Noncurrent Assets		34,619,736		15,228,187
Total Assets	$	120,804,266	$	85,706,528
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	6,507,356	$	2,615,730
Customer deposits		1,334,192		2,000,117
Income tax payable		2,063,161		1,654,475
Total Current Liabilities		9,904,710		6,270,322
Derivative liability		866,314		1,815,319
Total  Liabilities		10,771,024		8,085,641
Stockholders' Equity
Common stock, $.001 par value, 70,000,000 shares authorized, 19,898,229 and 16,714,457 issued and outstanding at June 30, 2010 and December 31,  2009, respectively		19,898		16,714
Additional paid in capital		59,947,337		37,671,645
Other comprehensive income		1,284,434		1,645,133
Statutory reserve		732,282		372,144
Retained earnings		48,049,291		37,915,251
Total Stockholders' Equity		110,033,241		77,620,887
Total Liabilities and Stockholders' Equity	$	120,804,265	$	85,706,528

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

4

UNIVERSAL TRAVEL GROUP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED JUNE 30,

	2010		2009
	Unaudited		Restated
Gross revenues,	$	36,741,613	$	18,405,473
Cost of services		26,188,474		11,875,779
Gross profit		10,553,139		6,529,694
Selling, general and administrative expenses		3,461,037		1,564,919
Income from operations		7,092,102		4,964,775
Other income (expense)
Other income		3,363		2,591
Gain/(Loss) on change in fair value of derivative liabilities		839,553		(5,819,481	)
Interest income		17,081		12,358
Total other income (expense)		859,997		(5,804,532	)
Income/(Loss) before income taxes –continuing operations		7,952,099		(839,757	)
Provision for income taxes		1,907,901		1,020,955
Income(Loss) from continuing operations		6,044,198		(1,860,712	)
Income/(loss) from discontinued operations				46,282
Loss on disposition of discontinued operations		-		(770,595	)
Net income/(loss) from discontinued operation		-		(724,313	)
Net income/(loss)	$	6,044,198	$	(2,585,025	)
Comprehensive income/(loss)
Net income/(loss)	$	6,044,198	$	(2,585,025	)
Foreign currency translation gains		55,759		13,880
Total comprehensive income/(loss)	$	6,099,957	$	(2,571,145	)
Income (Loss) per common share from continuing operations
Basic	$	0.35	$	(0.14	)
Diluted	$	0.33	$	(0.13	)
Net loss per common share – discontinued operations
Basic	$	-	$	(0.05	)
Diluted	$	-	$	(0.05	)
Total net income (loss) per common share
Basic	$	0.35	$	(0.19	)
Dilute	$	0.33	$	(0.18	)
Weighted average common shares outstanding
Basic		17,404,834		13,829,091
Diluted		18,219,639		14,301,057

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

5

UNIVERSAL TRAVEL GROUP

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30,

	2010			2009
	Unaudited			Restated
Gross revenues,	$	62,871,619		$	33,916,152
Cost of services		43,816,506			21,614,649
Gross profit		19,055,113			12,301,503
Selling, general and administrative expenses		6,524,679			3,097,716
Income from operations		12,530,434			9,203,787
Other income (expense)
Other income		6,917			6,419
Gains/(losses) on change in fair value of derivative liabilities		949,004			(5,706,217	)
Interest income		40,712			23,296
Total other income (expense)		996,633			(5,676,502	)
Income before income taxes - continuing operation		13,527,067			3,527,285
Provision for income taxes		3,393,028			2,138,151
Net income - continuing operation		10,134,039			1,389,134
Income/(loss) from discontinued operations					177,975
Loss on didposition		-			(770,595	)
Net income/(loss) from discontinued operation		-			(592,620	)
Net income	$	10,134,039		$	796,514
Comprehensive Income
Net income	$	10,134,039		$	796,514
Foreign currency translation gains/(losses)		(360,699	)		48,587
Total comprehensive income	$	9,773,340		$	845,101
Net income per common share - continuing operations
Basic	$	0.59		$	0.10
Diluted	$	0.57		$	0.10
Net income/(loss) per common share - discontinued operations
Basic	$	-		$	(0.04	)
Diluted	$	-		$	(0.04	)
Total net income per common share
Basic	$	0.59		$	0.06
Diluted	$	0.57		$	0.06
Weighted average common shares outstanding
Basic		17,066,154			13,851,530
Diluted		17,935,313			14,277,656

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

6

UNIVERSAL TRAVEL GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30,

	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,134,039		$	796,514
Add (deduct):
Net income from discontinued operations		-			592,620
Income from continuing operations		10,134,039			1,389,134
Depreciation and amortization		952,402			190,739
Provision for doubtful accounts		56,824			10,905
Stock based compensation		677,004			495,725
Gain on change in fair value of derivative liabilities		(949,004	)		5,706,217
Accounts receivable		(1,885,974	)		(2,716,909	)
Other receivable		(501,682	)		(4,725	)
Due from related party		(6,986,717	)		-
Advances		440,063			(758	)
Prepayments		(1,878,178	)		32,791
Trade deposits		2,069,253			3,168,216
Escrow deposits		-			600,499
Accounts payable and accrued expenses		3,307,393			1,601,759
Customer deposits		(665,925	)		(160,426	)
Income tax payable		(223,354	)		(848,691	)
Net cash (used in) provided by continuting operations		4,546,144			9,464,476
Net cash (used in) provided by discontinued operations		-			435,259
Net cash provided by operating activities		4,546,144			9,899,734
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment		(1,864,774	)		(6,076,248	)
Purchase of  intangibles		(51,359	)		(168,955	)
Proceeds from collection of notes		1,484,210			-
Acquistion deposits		478,391			-
Paid for acquisition – net of cash acquired		(16,085,930	)		(1,035,125	)
Net cash (used in) provided by continuing operations		(16,039,462	)		(7,280,328	)
Net cash (used in) provided by investing activities		(16,039,462	)		(7,280,328	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of equity financing		18,768,054			-
Net cash provided by financing activities		18,768,054			-
Effect of exchange rate changes on cash and cash equivalents		(360,699	)		48,587
Net change in cash and cash equivalents		6,914,037			2,667,993
Cash and cash equivalents, beginning balance		36,677,422			15,720,182
Cash and cash equivalents, ending balance	$	43,591,459		$	18,388,175
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income taxes	$	2,984,342		$	3,043,089
Other non-cash transactions
Net assets sold of discontinued operations	$	-		$	1,659,292
Goodwill attributable to sold discontinued operations		-			3,630,539
Note received on disposition		-			(2,773,411	)
Fair value of treasury stock received		-			(2,780,950	)
Loss on disposition		-			(770,595	)
Cash of discontinued operations	$	-		$	(1,035,125	)
Purchased goodwill	$	(14,915,770	)	$	-
Purchased intangible assets		(3,236,376	)		-
Fair value of assets purchased less cash acquired		(767,601	)		-
Acquisition financed with stock issuance		2,833,817			-
Acquisition paid for with cash - net of acquired	$	(16,085,930	)	$	-

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

7

UNIVERSAL TRAVEL GROUP

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND THE YEAR ENDED DECEMBER 31, 2009

						Additional			Other							Total
						Paid In			Comprehensive			Retained		Statutory		Stockholders’
			Amount			Capital			Income			Earnings		Reserve		Equity
Balance December 31, 2008 Restated	13,873,969		$	13,873		$	15,861,116		$	1,520,166		$	26,633,573	$	372,144	$	44,400,872
Cumulative effect of a change in accounting principle-adoption of EITF 07-05 effective January 1, 2009							(2,091,738	)					536,777				(1,554,961	)
Foreign currency translation adjustments										124,967							124,967
Stock based compensation – Net of warrants exercise	41,120			42			1,154,367										1,154,409
Fair market value Of treasury stock received and retired	(238,095	)		(239	)		(2,780,711	)									(2,780,950	)
Warrants exercised	811,941			813			6,571,017										6,571,830
Options exercised	3,300			3			9,567										9,570
Stock Subscription	2,222,222			2,222			18,948,027										18,950,249
Income for the year  ended December 31, 2009													10,744,901				10,744,901
Balance December 31, 2009	16,714,457		$	16,714		$	37,671,645		$	1,645,133		$	37,915,251	$	372,144	$	77,620,887
Balance December 31, 2009	16,714,457		$	16,714		$	37,671,645		$	1,645,133		$	37,915,251	$	372,144	$	77,620,887
Foreign currency translation adjustments										(360,699	)						(360,699	)
Stock based compensation							677,004										677,004
Stock issued for acquisitions	326,629			327			2,833,491										2,833,818
acquisitions adjustments															360,138		360,138
Stock Subscription	2,857,143			2,857			18,765,197										18,768,054
Income for the six months  ended June 30, 2010													10,134,039				10,134,039
Balance June 30, 2010	19,898,229		$	19,898		$	59,947,337		$	1,284,434		$	48,049,290	$	732,282	$	110,033,241

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

8

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

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 PRC, Xian Golden Net Travel Serve Services was incorporated on July 25, 2001 under the laws of PRC, 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 PRC, Chongqing Universal Travel E-Commerce Co., Ltd. and Shenzhen Universal Travel Agency Co., Ltd. were both incorporated in 2009 under the laws of PRC, Hebei Tianyuan Travel Agency Co., Ltd. was incorporated in April 1999 under the laws of PRC, Huangshan Holiday Travel Service Co., Ltd. was incorporated in April 1999 under the laws of PRC, Zhengzhou Yulongkang Travel Agency Co., Ltd. was incorporated in 2000 under the laws of PRC,  Kunming Business Travel Service Co., Ltd. was incorporated in 1993 under the laws of PRC, Shanxi Jinyang Travel Agency Co., Ltd. was incorporated in 1988 under the laws of PRC. 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 adiscontinued 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 audited 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 audited 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.

9

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Discontinued Operations

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

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

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

Accordingly, the Company has accounted for Shenzhen Speedy Dragon Enterprise Limited as discontinued operations. The consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Prior year’s amounts have been reclassified to confirm with current year’s presentation of the discontinued operations. The following table summarized the operating result of the discontinued operations for the three and six month ended June 30, 2009:

	Six months ended		Three months ended
	June 30, 2009		June 30, 2009
Sales	$	3,631,545	$	1,772,566
Cost of sales		3,218,140		1,613,857
Gross profit		413,405		158,709
Operating expenses		190,989		96,057
Income from discontinued operation before income tax		222,416		62,652
Income tax		44,441		16,370
Net Income from discontinued operations	$	177,975	$	46,282

10

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Translation Adjustment

As of June 30, 2010 and December 31, 2009 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., Hebei Tianyuan Travel Agency Co., Ltd., Huangshan Holiday Travel Service Co., Ltd., Zhengzhou Yulongkang Travel Agency Co., Ltd., Kunming Business Travel Service Co., Ltd., Shanxi Jinyang 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 a discontinued operation. 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.

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.

11

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 $471,751 and $414,927 as of June 30, 2010 and December 31, 2009, respectively.

Description	Balance at beginning of year		Charged to expenses		Deductions		Balance as of June 30, 2010
Allowance for doubtful receivables	$	414,927	$	56,824	$	-	$	471,751

12

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reverse Split

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

Property, Plant & Equipment

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

Furniture and Fixtures	5 years
Transportation equipment	5 years
Office equipment	5 years
Leasehold Improvements	5 – 10 years

As of June 30, 2010 and December 31, 2009, Property, Plant & Equipment of consist of the following:

	June 30, 2010			December 31, 2009
Office equipment	$	6,137,874		$	4,146,637
Transportation equipment		428,749			150,232
Furniture & fixtures		52,905			23,560
Leasehold improvements		1,465,385			1,385,481
		8,084,913			5,705,910
Accumulated depreciation		(1,597,694	)		(713,233	)
	$	6,487,219		$	4,992,677

Depreciation expense for the three months ended June 30, 2010 and 2009 was $ and $77,997, respectively, of which $59,040 and $70,197 was included as part of cost of services for the three months ended June 30, 2010 and 2009, respectively.

Depreciation expense for the six months ended June 30, 2010 and 2009 was $645,905 and $60,082, respectively, of which $107,232 and $140,424 was included as part of cost of services for the six months ended June 30, 2010 and 2009, respectively.

13

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 Subsidiaries, for additional information regarding goodwill.

As of June 30, 2010 and December 31, 2009, Goodwill consists of the following:

	June 30, 2010		December 31,2009
Shanghai Lanbao Travel Service Co., Ltd.	$	3,081,799	$	3,081,799
Foshan International Travel Service Co., Ltd.		6,049,576		6,049,576
Xian Golden Net Travel Serve Services Co.,Ltd.		764,895		764,895
Zhengzhou Yulongkang Agency Co., Ltd.		4,102,061		-
Hebei Taiyuan Travel Agency Co., Ltd.		3,208,455		-
Huangshan Holiday Travel Service Co., Ltd		1,949,080		-
Kunming Business Travel Service Co., Ltd.		4,009,070		-
Shanxi Jinyang Travel Agency Co., Ltd.		1,647,104		-
	$	24,812,040	$	9,896,270

14

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a Disposal of a Segment of a Business. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with 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 March 31, 2010 and December 31, 2009 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 values of the warrants were decreased by $536,776 from the warrants issuance date to the adoption date of ASC 815 on January 1, 2009.  As of January 1, 2009, the cumulative effect in adopting ASC 815 was a reduction to additional paid 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 six month ended June 30, 2010, the Company recorded a gain on change in fair value of derivative liability of $109,451 and $949,004, respectively, to mark to market for the increase in fair value of the warrants during the three and six month periods ended June 30, 2010.   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 EITF No. 07-05.  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.

The Company determined the fair value of the reset provisions at June 30, 2010 was 886,314. The fair value was determined using the Black Scholes Option Pricing Model based on the following assumptions: dividend yield: -0-%; volatility: 115%, risk free rate: 1.79%, expected term: 3.16years.

15

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 a discontinued operation (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.

16

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

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.

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.

17

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 June 30, 2010 and 2009, such expenses amounted $340.372 and $1,198,963, respectively. For the six months ended June 30, 2010 and 2009, such expenses amounted $677,004 and $1,504,751, 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.

18

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangibles

Intangible assets are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made annually to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. No impairments of intangible assets have been identified during any of the periods presented. The Company’s intangible assets consist primarily of map of hotels and scenic spots used for marketing purposes, CRM systems software, accounting software, and Organization cost of new companies. These definitive lived intangible assets are being amortized over their useful lives. Expenditures of $51,359 and $168,954 were capitalized for the six months ended June 30, 2010 and 2009, respectively, and will be amortized over a 5 year life.  In conjunction the acquisitions during the six months ended June 30, 2010, the Company capitalized $3,236,376 of Identifiable Intangible Assets, which are being amortized over 5 years. The Company recorded amortization expenses for definitive lived intangible assets of $45,561 and $55,572 for the six months ended June 30, 2010 and 2009, $29,046 and $28,545 for the three months ended June 30, 2010 and 2009, respectively, and amortization expenses for Identifiable Intangible Assets of $260,937 and $161,819 for the six months and three months ended June 30, 2010, respectively. The Company will record approximately $800,672, $762,162 and $683,499 over 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.

19

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net Income (Loss) Per Share (Continued)

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

	Six months ended June 30,				Three months ended June 30,
	2010		2009		2010		2009
Basic earnings (losses) from continuing operations per share:
Numerator:
Income (loss) from continuing operations  used in computing basic earnings (losses) per share	$	10,134,039	$	1,389,134	$	6,044,198	$	(1,860,712	)
Income (loss) from continuing operations applicable to common shareholders	$	10,134,039	$	1,389,134	$	6,044,198	$	(1,860,712	)
Denominator:
Weighted average common shares outstanding		17,066,154		13,851,530		17,404,834		13,829,091
Basic earnings (losses) per share from continuing operations	$	0.59	$	0.10	$	0.35	$	(0.14	)
Diluted earnings (losses) per share from continuing operations:
Numerator:
Income (loss) from continuing operations used in computing diluted earnings (losses) per share	$	10,134,039	$	1,389,134	$	6,044,198	$	(1,860,712	)
Income (loss) from continuing operations applicable to common shareholders	$	10,134,039	$	1,389,134	$	6,044,198	$	(1,860,712	)
Denominator:
Weighted average common shares outstanding		17,066,154		13,851,530		17,404,834		13,829,091
Weighted average effect of dilutive securities:
Stock options and warrants		869,159		426,126		814,806		471,966
Shares used in computing diluted net income (loss) per share		17,935,313		14,277,656		18,219,639		14,301,057
Diluted earnings (losses) per share from continuing operations	$	0.57	$	0.10	$	0.33	$	(0.13	)

20

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net Income (Loss) Per Share (Continued)

	Six months ended June 30,					Three months ended June 30,
	2010		2009			2010		2009
Basic earnings (losses) from discontinuing operations per share:
Numerator:
Income (loss) from discontinuing operations  used in computing basic earnings per share	$	-	$	(592,620	)	$	-	$	(724,313	)
Income (loss) from discontinuing operations applicable to common shareholders	$	-	$	(592,620	)	$	-	$	(724,313	)
Denominator:
Weighted average common shares outstanding		17,066,154		13,851,530			17,404,834		13,829,091
Basic earnings per share from discontinuing operations	$	-	$	(0.04	)	$	-	$	(0.05	)
Diluted earnings (losses) per share from discontinuing operations:
Numerator:
Income (loss) from discontinuing operations used in computing diluted earnings (losses) per share	$	-	$	(592,620	)	$	-	$	(724,313	)
Income (loss) from discontinuing operations applicable to common shareholders	$	-	$	(592,620	)	$	-	$	(724,313	)
Denominator:
Weighted average common shares outstanding		17,066,154		13,851,530			17,404,834		13,829,091
Weighted average effect of dilutive securities:
Stock options and  warrants		869,159		426,126			814,806		471,966
Shares used in computing diluted net income (loss) per share		17,935,313		14,277,656			18,219,639		14,301,057
Diluted earnings per share from discontinuing operations	$	-	$	(0.04	)	$	-	$	(0.05	)
Total net income (loss) per common share
Basic	$	0.59	$	0.06		$	0.35	$	(0.19	)
Dilute	$	0.57	$	0.06		$	0.33	$	(0.18	)

21

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

Recent Accounting Pronouncements

In February, 2007, FASB issued SFAS 159 ‘The Fair Value Option for Financial Assets and Financial Liabilities’ – Including an Amendment of FABS Statement No. 115.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments.  This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, SFAS No 159 was superseded by the Financial Instruments Topic of FASB Accounting Standards Codification (“ASC 825”), the adoption of this accounting requirement has no effect on the Company’s consolidated financial statements.

In February, 2007, FASB issued SFAS 159 ‘The Fair Value Option for Financial Assets and Financial Liabilities’ – Including an Amendment of FABS Statement No. 115.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments.  This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, SFAS No 159 was superseded by the Financial Instruments Topic of FASB Accounting Standards Codification (“ASC 825”), the adoption of this accounting requirement has no effect on the Company’s consolidated financial statements.

 In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”).  This Statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). SFAS No 160 was superseded by the Consolidation Topic of FASB Accounting Standards Codification (“ASC 810”) The Company adopted SFAS 160 on January 1, 2009. The adoption of this statement had no effect on the Company’s consolidated financial statements.

22

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements – (Continued)

In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. SFAS No 161 was superseded by the Derivative and Hedging Topic of FASB Accounting Standards Codification (“ASC 815”).

On May 8, 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 162, The Hierarchy of Generally Accepted Accounting Principles, which will provide framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. With the issuance of SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from auditing literature to accounting literature.  SFAS No 162 was superseded by the General Accounting Principle Topic of FASB Accounting Standards Codification (“ASC 105”).

In June 2008, the FASB ratified the consensus reached on Emerging Issues Task Force (“EITF”) Issue No. 07-05, 05”). EITF No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial statements issued for fiscal years beginning after December 15, 2008. EITF No. 07-05 was superseded by the Derivative and Hedging Topic of FASB Accounting Standards Codification (“ASC 815”). Based on the Company’s evaluation of this issue, the adoption of this accounting requirement has a material effect on the Company’s consolidated financial statements, please see note above under “Derivative Liability”.

In June 2009, the FASB issued amended standards for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal year 2010 and we are currently evaluating the impact that adoption will have on our consolidated financial statements.

In June 2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events), which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or available to be issued. It is effective for interim and annual periods ending after June 15, 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

23

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements – (Continued)

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009. There was no material impact upon the adoption of this standard on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010 (the Company’s fiscal year 2012); early adoption is permitted.  The Company is currently evaluating the impact of adopting ASU 2009-14 on its financial statements.

Merger and Corporate Restructure

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

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

24

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 3 – TRADE DEPOSITS AND ADVANCES

Trade deposits represents amount held by Airlines and deposits. As ofJune 30, 2010 and December 31, 2009 the Company had paid $7,706,484 and $9,775,735 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 June 30, 2010 and December 31, 2009:

	June 30,		December 31,
	2010		2009
Shenzhen Yuzhilu Aviation Service Co., Ltd:
Deposit for tripeasy kiosks. The Company will start record of asset and depreciation on a 5 year straight-line method for the actual number of kiosk when they start operation.	$	-	$	1,465,592
Deposit for central ticket system. This was a credit based for obtaining air tickets from third party before any payments, and the full amounts are returnable.		3,834
Deposit for airlines. This was a credit based for issuing air-tickets, and the full amount is returnable if the company discontinues air-ticket business.		516,115		2,811,004
Deposit for Financial System Software		-		16,898
Deposit for air-ports. This was a deposit for admittance to do marketing in air-ports, and is deductible against monthly rental obligation to air-ports		-		8,508
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.		3,529,929		1,100,158
Subtotal		4,049,878		5,402,160
Huangshan Holiday Travel Agency Co., Ltd.:
Advance payment to tour guides for expenses during leading the tour. This will be transferred to costs when the tour guide return from tour and provide supporting evidence.		885		-
Subtotal		885		-
Foshan Overseas International Travel Service Co. Ltd.:
Deposit paid to tour companies.  This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies.		458,056		969,261
Advance payment to tour guides for expenses during leading the tour. This will be transferred to costs when the tour guide return from tour and provide supporting evidence.		-		243,342
Subtotal		458,056		1,212,603
Xian Golden Net Travel Serve Services, Ltd.:
Deposit for Tour companies. This was a credit based for co-operate travel agencies, and is deductible against tour payments, the balance is returnable when cease doing business with these agencies		560,353		425,396

25

Deposit for transportations. This was a credit based for co-operate transportation suppliers, and is deductible against transportation payments, the balance is returnable when cease doing business with these agencies.		-		132,019
Subtotal		560,353		557,415
Chongqing Travel World E-Business Co., Ltd.
Deposit for agencies. This was a credit based for the company to issue other ticket agencies' special fare air-ticket, and the full amount is returnable if the company discontinues its business with other agencies.		2,600,447		2,587,279
Subtotal		2,600,447		2,587,279
Shenzhen Universal Travel
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.		36,865		16,278
Subtotal		36,865		16,278
Total	$	7,706,484	$	9,775,735

The Company cancelled a co-operation agreement with an unrelated company, to assist that company in their business development by participating in that business operation and providing working capital funding and the unrelated company returned all advances. As of June 30, 2010 and December 31, 2009 the Company has advanced this company $0 and $440,063, respectively.

26

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

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 – RELATED PARTY TRANSACTIONS

As of June 30, 2010, Due from related party account has balance of $6.99 million, which was an advance for cash payment of two acquisitons in June. The payments were paid by corporate account on June 28, 2010 and the related party returned the same amount on August 10, 2010.

Note 6 - INCOME TAXES

The Company through its subsidiary Shenzhen Yuzhilu Aviation Service Co., Ltd. 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 six months ended June 30, 2010 and 2009.

	Six months		Six months		Three months		Three months
	ended		ended		ended		ended
	June 30,		June 30,		June 30,		June 30,
	2010		2009		2010		2009
Current	$	3,393,028	$	2,138,151	$	1,907,901	$	1,020,955
Deferred				-				-
Total	$	3,393,028	$	2,138,151	$	1,907,901	$	1,020,955

Note 7 – COMMITMENTS

The Company leases various office facilities under month-to-month arrangements. Rental expense for leases consisted of $551,511 and $147,903 for six months ended June 30, 2010 and 2009, respectively. Rental expense for leases were $340,995 and $52,966 for three months ended June 30, 2010 and 2009, respectively.  The Company has future minimum lease obligations as of June 30, 2010 as follows:

2011	$	698,395
2012		295,670
2013		262,934
2014		201,274
2015		30,818
There after		11,060
Total	$	1,500,151

27

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK

In January 2007 the company adopted the Universal Travel Group 2007 Equity Incentive Plan. Under the terms of this Plan the Company issued 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.

On June 28, 2010, the Company consummated the acquisition of a 100% interest in Kunming Business Travel Agency Co., Ltd.  ("KBT") for a cash and stock transaction valued at approximately US$5.7 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

The stock consideration consisted of 79,487 newly issued shares of the Registrant’s common stock, which were given to KBT’s Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $5,163,626.

KBT 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 shareholder of KBT.

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	$	686,825
Accounts receivable		1,983
Due to shareholders		155,624
Other assets		247,737
Property Plant & Equipment		94,074
Identifiable Intangibles		892,898
Goodwill		4,009,070
Total assets acquired		6,088,211
Liabilities assumed
Accounts & Income Taxes payable		244,784
Other payable		107,559
Total	$	5,735,868

The excess of purchase price over tangible assets acquired and liabilities assumed was $4,901,968 of which 4,009,070 was recorded as goodwill. At the time of the acquisition $892,898 of identifiable intangibles assets existed under the contractual-legal or the reparability criterion as required under ASC 805.

Prior to the acquisition, Kunming Business Travel Agency Co., Ltd. prepared its financial statements under accounting principles generally accepted in the United States of America. 

On June 28, 2010, the Company consummated the acquisition of a 100% interest in Shanxi Jinyang Travel Agency Co., Ltd. ("SJT") for a cash and stock transaction valued at approximately US$2.3 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

28

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK (CONTINUED)

The stock consideration consisted of 31,387 newly issued shares of the Registrant’s common stock, which were given to SJT’s Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $2,038,946.

SJT 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 shareholder of SJT.

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	$	18,655
Due from shareholders		247,357
Other assets		146,972
Property Plant & Equipment		21,634
Identifiable Intangibles		361,124
Goodwill		1,647,104
Total assets acquired		2,442,846
Liabilities assumed
Accounts & Income Taxes payable		38,087
Other payable		139,827
Total	$	2,264,932

The excess of purchase price over tangible assets acquired and liabilities assumed was $2,008,228 of which 1,647,104 was recorded as goodwill. At the time of the acquisition $361,124 of identifiable intangibles assets existed under the contractual-legal or the reparability criterion as required under ASC 805.

Prior to the acquisition, Shanxi Jinyang Travel Agency Co., Ltd. prepared its financial statements under accounting principles generally accepted in the United States of America. 

On March 29, 2010 the Company consummated the acquisition of a 100% interest in Zhengzhou Yulongkang Travel agency Co. Ltd ("ZYT") 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 60,634 newly issued shares of the Registrant’s common stock, which were given to ZYT’s Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $5,141,764.

 ZYT 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 shareholder of ZYT.

29

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK (CONTINUED)

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

Cash acquired	$	1,147,303
Accounts receivable		32,286
Other assets		5,926
Property Plant & Equipment		31,308
Identifiable Intangibles		805,626
Goodwill		4,102,061
Total assets acquired		6,124,510
Liabilities assumed
Accounts & Income Taxes payable		364,999
Other payable		46,575
Total	$	5,712,936

The excess of purchase price over tangible assets acquired and liabilities assumed was $4,907,687 of which 4,102,061 was recorded as goodwill. At the time of the acquisition $805,626 of identifiable intangibles assets existed under the contractual-legal or the reparability criterion as required under ASC 805.

Prior to the acquisition, Zhengzhou Yulongkang Travel agency Co. Ltd prepared its financial statements under accounting principles generally accepted in the United States of America. 

On March 26, 2010 the Company consummated the acquisition of a 100% interest in Huangshan Holiday Travel Service Co., Ltd ("HHT") 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 61,847 newly issued shares of the Registrant’s common stock, which were given to HHTs Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $2,343,824.

HHT 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 shareholder of HHT.

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:

30

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8– COMMON STOCK (CONTINUED)

Cash acquired	$	87,867
Accounts receivable		204,435
Other assets		404,929
Property Plant & Equipment		75,788
Identifiable Intangibles		479,870
Goodwill		1,949,080
Total assets acquired		3,201,969
Liabilities assumed
Accounts & Income Taxes payable		223,734
Other payable		48,720
Total	$	2,929,515

The excess of purchase price over tangible assets acquired and liabilities assumed was $2,428,950 of which 1,949,080 was recorded as goodwill. At the time of the acquisition $479,870 of identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 805.

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

On March 29, 2010 the Company consummated the acquisition of a 100% interest in Hebei Tianyuan Travel Agency Co., Ltd ("HTT") for a cash and stock transaction valued at approximately US$4.4 million in aggregate. This amount is included in the cost of net assets and goodwill purchased.

The stock consideration consisted of 93,283 newly issued shares of the Registrant’s common stock, which were given to HTT’s Shareholder immediately before the completion of the Share Exchange Transaction. The cash consideration consisted of $3,519,736.

 HTT 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 shareholder of HTT.

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	$	181,316
Accounts receivable		166,618
Other assets		465,034
Property Plant & Equipment		42,308
Identifiable Intangibles		696,858
Goodwill		3,208,455
Total assets acquired		4,760,589
Liabilities assumed
Accounts & Income Taxes payable		238,525
Other payable		123,602
Total	$	4,398,462

31

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK (CONTINUED)

The excess of purchase price over tangible assets acquired and liabilities assumed was $3,905,313 of which $3,208,455 was recorded as goodwill. At the time of the acquisition $696,858 of identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 805.

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

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

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

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

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

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

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

32

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK (CONTINUED)

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.

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

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

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

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

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

 The excess of purchase price over tangible assets acquired and liabilities assumed of $3,081,799 was recorded as goodwill. At the time of the acquisition no identifiable intangibles assets existed under the contractual-legal or the separability criterion as required under ASC 825.

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.

33

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK (CONTINUED)

 Pursuant to a share exchange agreement, the Company issued 374,321 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 $3,153,500 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.

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

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

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

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

34

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 8 – COMMON STOCK (CONTINUED)

 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)

On December 15, 2009, the Company closed a Subscription Agreements with certain investors to sell to them an aggregate of 2,222,222 shares of common stock of the Company, par value $0.001 (the “Shares”) for a purchase price of $9.00 per share and an aggregate purchase consideration of $19,999,998. In connection with the subscription the company paid fees and other costs pertaining to the agreement totaling $1,049,749. Net proceeds of the transaction were $18,950,249.  The offer and sale of the Shares were made pursuant to an effective Registration Statement on Form S-3 (Registration No. 333- 161139) initially filed with the Securities and Exchange Commission on August 7, 2009 and amended on November 2, 2009. The Registration Statement was declared effective on November 5, 2009.

On June 21, 2010, the Company closed an underwriting agreement with Brean Murrary, carret & Co., LLC, as representative of the underwriters, related to a public offering of 2, 857, 143 shares of the common stock, par value $0.001 (the “shares”) for a purchase price of $7.00 per share and an aggregate purchase consideration of $20,000,001. In connection with the subscription the company paid 5% underwriting commission, fees and other costs pertainning to the agreement totaling $1,231,947. Net proceeds of the transaction were $18,768,054. The offer and sale of the Shares were made pursuant to an effective Registration Statement on Form S-3 (Registration No. 333- 161139) initially filed with the Securities and Exchange Commission on August 7, 2009 and amended on November 2, 2009. The Registration Statement was declared effective on November 5, 2009.

Note 9 – STOCK WARRANTS, OPTIONS, AND COMPENSATION

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.

35

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 9 – STOCK WARRANTS, OPTIONS, AND COMPENSATION (CONTINUED)

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.

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

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

On January 20, 2009, pursuant to the Securities Purchase agreement entered into on August 28, the Company enacted the Universal Travel Group 2009 Incentive Stock Option Plan entitles the grant of up to 2,200,000 shares of common stock of Universal Travel Group, par value $0.001 to certain employees of the Company either as stock or stock options, and the subsequent exercise of any stock options.  The options are exercisable until 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 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. Stock options— the option holder has no voting or dividend rights. The company records the expense of the stock options over the related vesting period. The options were valued using the Black-Scholes option-pricing model at the model at the date of grant stock option pricing.

On 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.

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 $677,004 and $495,725 for the six months ended June 30, 2010 and 2009, and $340,372 and $330,725 for the three months ended June 30, 2010 and 2009, respectively.

36

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 9 – STOCK WARRANTS, OPTIONS, AND COMPENSATION (CONTINUED)

	Total		Exercise Price		Remaining Life	Aggregate Intrinsic Value
Outstanding, December 31, 2009		1,603,888	$	2.70–11.25	7.44-9.67yrs		-
Outstanding, June 30, 2010		1,603,888

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 EITF No. 07-05 on January 1, 2009, the Company determined that the warrants did not qualify for a scope exception under SFAS No. 133 as they were determined to not be indexed to the Company’s stock as prescribed by EITF No. 07-05.  On January 1, 2009, the warrants were reclassified from equity to derivative liability for the then fair market value and marked to market (see Note 2 Derivative Liability).  On August 20, 2009 322,580 warrants valued at $3,598,571 as of that date, were exercised under the cashless exercise provisions of the warrants. The Company issued 132,251 shares of common stock. On October 15, 2009, 215,054 warrants valued at $2,888,495 as of that date were exercised under the cashless exercise provision of the warrants. The company issued 103,318 shares of common stock.

Note 10 - OTHER COMPREHENSIVE INCOME

Balances of related after-tax components comprising accumulated other comprehensive income, included in stockholders equity, as of June 30, 2010 and December 31, 2009 are as follows:

	Foreign Currency			Accumulated Other
	Translation			Comprehensive
	Adjustment			Income
Balance December 31, 2008	$	1,520,166		$	1,520,166
Changes for year ended December 31, 2009		124,967			124,967
Balance December 31, 2009		1,645,133			1,645,133
Changes for  the six months ended June 30, 2010		(360,699	)		(360,699	)
Balance at June 30, 2010	$	1,284,434		$	1,284,434

37

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 11 - CURRENT VULNERABILITY DUE TO CERTAIN RISK FACTORS

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

Note 12 – MAJOR CUSTOMERS AND CREDIT RISK

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

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 eleven 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., Shenzhen Universal Travel Agency Co., Ltd., Hebei Tianyuan Travel Agency Co., Ltd., Zhengzhou Yulongkang Travel Agency Co., Ltd., Huangshan Holiday Travel Service Co., Ltd., Kunming Business Travel Service Co., Ltd., and Shanxi Jinyang Travel Agency Co., Ltd.). Pursuant to SFAS 131 they disclose segments on a single entity basis, which in their case is the legal entity. Our air-ticketing segment relates to the segment reporting of Shenzhen Yuzhilu Aviation Service Co., Ltd. and Chongqing Travel World E-Business Co., Ltd., hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd., packaged tours segment relates to Foshan International Travel Service Co., Ltd., Xi’an Golden Net Travel Serve Service Company Ltd., Shenzhen Universal Travel Agency Co., Ltd., Hebei Tianyuan Travel Agency Co., Ltd., Zhengzhou Yulongkang Travel Agency Co., Ltd., Huangshan Holiday Travel Service Co., Ltd., Kunming Business Travel Service Co., Ltd., and Shanxi Jinyang Travel Agency Co., Ltd.. Management monitors these segments regularly to make decisions about resources to be allocated to the segment and assess its performance.

38

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 13 -   SEGMENT INFORMATION (CONTINUED)

The following tables’ present summarized information by segment:

	Air		Hotel		Package
	Ticketing		Reservation		Tours		Other			Total
	Six Months Ended June 30, 2010
Sales, net	$	10,442,953	$	6,169,248	$	46,259,418	$	-		$	62,871,619
Cost of sales	$	1,929,772	$	2,160,523	$	39,726,211	$	-		$	43,816,506
Gross profit	$	8,513,181	$	4,008,725	$	6,533,207	$	-		$	19,055,113
Income from operations	$	4,833,592	$	3,918,849	$	5,429,109	$	(654,482	)	$	13,527,068
Depreciation & Amortization	$	641,117	$	879	$	49,469	$	260,937		$	952,402
Asset Expenditures	$	1,881,654	$	33,467	$	1,012	$			$	1,916,133
Total assets	$	30,987,883	$	9,499,533	$	8,024,758	$	5,210,309		$	53,722,483
	Six Months Ended June 30, 2009
Sales, net	$	6,045,642	$	5,230,975	$	22,639,535	$	-		$	33,916,152
Cost of sales	$	651,979	$	1,683,627	$	19,279,043	$	-		$	21,614,649
Gross profit	$	5,393,663	$	3,547,348	$	3,360,492	$	-		$	12,301,503
Income from operations	$	3,722,661	$	3,471,539	$	2,846,988	$	(837,401		$	9,203,787
Depreciation & Amortization	$	180,515	$	2,618	$	7,606	$	-		$	190,739
Asset Expenditures	$	6,076,248	$	-	$	-	$	-		$	6,076,248
Total assets	$	30,987,883	$	9,499,533	$	8,024,758	$	5,210,309		$	53,722,483
	Three Months Ended June 30, 2010
Sales, net	$	6,005,989	$	3,018,872	$	27,716,752	$	-		$	36,741,613
Cost of sales	$	1,127,183	$	1,071,350	$	23,989,941	$	-		$	26,188,474
Gross profit	$	4,878,806	$	1,947,522	$	3,726,811	$	-		$	10,553,139
Income from operations	$	2,566,078		1,890,597		2,845,473		649,951		$	7,952,099
Depreciation & Amortization	$	342,699	$	440	$	35,087	$	161,819		$	540,045
Asset Expenditures	$	1,243,298	$	22,061	$	1,011	$	-		$	1,266,371
Total assets	$	30,987,883	$	9,499,533	$	8,024,758	$	5,210,309		$	53,722,483
	Three Months Ended June 30, 2009
Sales, net	$	3,294,514	$	2,714,144	$	12,396,815	$	-		$	18,405,473
Cost of sales	$	349,173	$	910,164	$	10,616,442	$	-		$	11,875,779
Gross profit	$	2,945,341	$	1,803,980	$	1,780,373	$	-		$	6,529,694
Income from operations	$	2,147,871	$	1,772,243	$	1,461,127	$	(416,466		$	4,964,775
Depreciation & Amortization	$	100,886	$	1,557	$	3,640	$	-		$	106,083
Asset Expenditures	$	4,815,850	$	-	$	-	$	-		$	4,815,850
Total assets	$	30,987,883	$	9,499,533	$	8,024,758	$	5,210,309		$	53,722,483

39

UNIVERSAL TRAVEL GROUP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(UNAUDITED)

Note 14 -   SUBSEQUENT EVENTS

On March 4, 2010, the company announced that it has entered into letters of intent to acquire four travel agency businesses in China – Tianjin Hongxun Aviation Agency Co., Ltd. (“Tianjin Hongxun”), Shanxi Jinyang Travel Agency Co., Ltd. (“Shanxi Jingyang”), Kunming Business travel Agency Co., Ltd. (“Kunming Business Travel”), and Shandong Century Aviation Development Co., Ltd. (“Shandong Century”) – for a total purchase consideration of $19.5 million. The combined unaudited 2009 revenue and net income for the four travel agencies were $23.0 million and $3.0 million, respectively.  The final purchase consideration of Tianjin Hongxun and Shandong Century may be subject to adjustment after completion of the diligence by the Company.

On July 13, 2010, the company announced a partnership with Agoda, a subsidiary of Priceline.com, to strengthen its hotel reservation business segment and upgrade its website, www.cnutg.com. Under the agreement, Universal Travel Group will offer its customers access to Agoda’s international network of hotels. Through the updated cnutg.com website, travelers will be able to enjoy special Agoda promotions and instant confirmation at tens of thousands of hotels worldwide.  Through this partnership with Universal Travel Group, Agoda intends to increase its exposure in the large Chinese travel market.

For the six months ended June 30, 2010, the Company has evaluated subsequent events for potential recognition and disclosure through August 9, 2010, the date of the financial statement issuance.

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Item2.  Management’s Discussion and Analysis or Plan ofOperation.

Forward-LookingStatements: No Assurances Intended

Inaddition to historical information, this Quarterly Report containsforward-looking statements, which are generally identifiable by use of the words“believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,”“projects,” or similar expressions. These forward-looking statements representManagement’s belief as to the future of Universal TravelGroup.  Whether those beliefs become reality will depend on manyfactors that are not under management’s control.  Many risks anduncertainties exist that could cause actual results to differ materially fromthose reflected in these forward-looking statements. Readers are cautioned notto place undue reliance on these forward-looking statements. We undertake noobligation to revise or publicly release the results of any revision to theseforward-looking statements.

BusinessOverview

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

Under thetheme of "Wings towards a more colorful life", our core services include tourpackaging, booking services for air tickets and hotelsreservations.

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

In thesecond quarter of 2009, based on the past performance of our air cargo business,as well as the market perspective of this business, we decided to spin off ourSpeedy Dragon Enterprise Limited subsidiary, and as a result, exited the aircargo business. We believe the spin-off was beneficial to us as it allowed us toconcentrate on our core business of selling air tickets, hotel accommodationsand packaged tours.

In orderto seize the opportunities arising from the economic promotion by the Chinesegovernment of the mid and western regions of the PRC, we strategically set upChongqing Universal Travel E-Business Co., Ltd. to strengthen our presence inthat region in the second quarter of 2009 and began generating revenues in thethird quarter of 2009.

In March2010, we completed the acquisition of Huangshan Holiday Travel Service Co., Ltd.("Huangshan Holiday"), Hebei Tianyuan International Travel Agency Co., Ltd.("Tianyuan"), and Zhengzhou Yulongkang Travel Agency Co., Ltd. ("Yulongkang").At the end of June 2010, we also completed the acquisition of Shanxi JinyangTravel Agency Co., Ltd ("Shanxi Jinyang") and Kunming Business Travel AgencyCo., Ltd (“Kunming Business Travel”), two other packaged tour servicesproviders.

Webelieve that these acquisitions of travel service providers would help usfurther expand our geographic coverage in the fast growing domestic travelmarket. We believe our comprehensive service platform and broad customer reachwill enable us to improve the sales volume and operation efficiency of these newacquisitions. On the other hand, they will also help lift the sales volume andoperation efficiency of our existing subsidiaries, and thus improve our overallearnings and profit margins.

41

Wecurrently have three discrete lines of business and revenue. Our air-ticketingsegment relates to the segment reporting of Shenzhen Yuzhilu Aviation ServiceCo., Ltd. and Chongqing Travel World E-Business Co., Ltd. Our hotel reservationsegment relates to Shanghai Lanbao Travel Service Co., Ltd. Our packaged tourssegment relates to the remaining eight operating subsidiaries: FoshanInternational Travel Service Co., Ltd, Xi’an Golden Net Travel Serve ServiceCompany Limited, Shenzhen Universal Travel Agency Co. Ltd, Huangshan HolidayTravel Service Co., Ltd., Hebei Tianyuan International Travel Agency Co., Ltd,Zhengzhou Yulongkang Travel Agency Co., Ltd, Shanxi Jinyang Travel Agency Co.,Ltd and Kunming Business Travel Agency Co., Ltd.

Operationsof each segment are exclusive to the operations of the associated subsidiarycompany. Those new subsidiaries which previously had air-ticketing service orhotel reservation services were consolidated into our existing air-ticketing andhotel reservation services. With higher volume in these two business segments,we believe that we now have better bargaining power with our suppliers, theairlines or hotels.

On June21, 2010 we closed a common stock offering transaction. In this transaction, weissued 2,857,143 shares of common stock at $7.00 per share for an aggregateamount of $20 million.

On June24, 2010, upon the approval of the Civil Aviation Administration of China(CAAC), a number of Chinese airlines claimed that they were authorized to cutthe commission paid to travel agencies from 5% to 3%. Currently there has beenno major impact on our existing businesses, since these airlines hadonly reduce the commission rate for a few flights departing from Beijing andShanghai.

Webelieve that airlines will still heavily rely on travel agencies to sell theirtickets in the near future and will have to continue payment sales commissionsto them.

We alsoanticipate the proposed airline commission rate cut would accelerate theconsolidation of  the Chinese travel industry. The more efficientand better managed service providers will excel over their competitions and gainmore market shares in this industry, while their smaller competitors wouldeither consolidate with other agencies or wind up.

In July2010, we partnered with Agoda, a subsidiary of Priceline.com, to strengthen ourhotel reservation business segment. Under this partnership agreement, we offerour customers access to Agoda's international network of hotels. Through ourwebsite, travelers will be able to enjoy special Agoda promotions and instantconfirmation at tens of thousands of hotels worldwide. Also through thispartnership, Agoda intends to increase its exposure in the large Chinese travelmarket. This partnership offers us the opportunity to work with one of theworld's largest online hotel reservation agencies and further strengthen ourhotel reservation segment. The cooperation with Agoda fits with our strategy ofexpanding our higher margin business segments. We intend to leverage Agoda'sglobal brand awareness and look forward to higher volume in hotelreservation.

In 2009,we were selected one of the Top Ten Brands of Travel Services in the People’sRepublic of China. We believe our quality of services will distinguish us in ourlong term competitiveness.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE, 2010 AND 2009

The following table presents certain consolidated statement of operations information derived from the consolidated statements of income for the three months ended June 30, 2010 and 2009 respectively.

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

42

	Three months ended  June 30, 2010			Three months ended  June 30, 2009			Increase /  Decrease			Percentage
Revenues	$	36,741,613		$	18,405,473		$	18,336,140		100	%
Cost of Services		(26,188,474	)		(11,875,779	)		(14,312,695	)	121	%
Gross Profit		10,553,139			6,529,694			4,023,445		62	%
SG&A		(3,461,037	)		(1,564,919	)		(1,896,118	)	121	%
Income from Operations		7,092,102			4,964,775			2,127,327		43	%
Other income		3,363			2,591			772		23	%
Gain (Loss) on change in fair value of derivative liabilities		839,553			(5,819,481	)		6,659,034		N/M
Interest income		17,081			12,358			4,723		38	%
Income before income taxes		7,952,099			(839,757	)		8,791,856		N/M
Provision for income taxes		(1,907,901	)		(1,020,955	)		(886,945	)	87	%
Income (Loss)  from continuing operations		6,044,198			(1,860,712	)		7,904,910		N/M
Income from discontinued operations					46,282			(46,282	)
Loss on disposition of discontinued operations					(770,595	)		770,595
Net  Income (Loss)		6,044,198			(2,585,025	)		8,629,223		N/M

For the three months ended June 30, 2010:

Revenue Segment	Air tickets  (YZL &  CTE)			(%) of  sector			Hotel (SLB)			(%) of  sector			Tours  (All Others)			(%) of  sector			Total
Revenue	$	6,005,989			16.3	%		3,018,872			8.2	%		27,716,752			75.4	%		36,741,613
Cost of Services		(1,127,183	)		4.3	%		(1,071,350	)		4.1	%		(23,989,941	)		91.6	%		(26,188,474	)
Gross Profit	$	4,878,806			46.2	%		1,947,522			18.5	%		3,726,811			35.3	%		10,553,139
Gross Margin		81.2	%					64.5	%					13	%					28.7	%
Segment effect in Gross Margin (*)		13.3	%					5.3	%					10.1	%					28.7	%

For the three months ended June 30, 2009:

Revenue Segment	Air tickets  (YZL)			(%) of  sector			Hotel (SLB)			(%) of  sector			Tours  (All Others)			(%) of  sector			Total
Revenue	$	3,294,514			17.9	%		2,714,144			14.7	%		12,396,815			67.4	%		18,405,473
Cost of Services		(349,173	)		2.9	%		(910,164	)		7.7	%		(10,616,442	)		89.4	%		(11,875,779	)
Gross Profit	$	2,945,341			45.1	%		1,803,980			27.6	%		1,780,373			27.3	%		6,529,694
Gross Margin		89.4	%					66.5	%					14.4	%					35.5	%
Segment effect in Gross Margin (*)		16.0	%					9.8	%					9.7	%					35.5	%

 (*) "Segment effect in Gross Margin" was calculated by multiplying "the 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. Our hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd. Our packaged tours segment relates to the remaining eight operating subsidiaries: Foshan International Travel Service Co., Ltd, Xi’an Golden Net Travel Serve Service Company Limited, Shenzhen Universal Travel Agency Co. Ltd, Huangshan Holiday Travel Service Co., Ltd., Hebei Tianyuan International Travel Agency Co., Ltd, Zhengzhou Yulongkang Travel Agency Co., Ltd, Shanxi Jinyang Travel Agency Co., Ltd and Kunming Business Travel Agency Co., Ltd. Operations of each segment are exclusive to the operations of the associated subsidiary company.

43

Revenues for the three months ended June 30, 2010 were $36,741,613, compared to $18,405,473 for the same period 2009, an increase of $18,336,140, or approximately 100%. The contributions from the five newly acquired subsidiaries were $11,643,472, or 31.7% of our total revenues for these three months. Excluding this effect, revenues for the three months ended June 30, 2010 were $25,098,141, compared to $18,405,473 for the same period 2009, an increase of $6,292,668, or approximately 36 %.

We have expended considerable efforts to expand our businesses, especially the packaged tour business. This resulted in the acquisition of five new packaged tour subsidiaries this year.  For that reason, along with the strong demand for travel demand as a result of the recovery of Chinese economy, and the continuing effect of the Chinese government’s stimulus package, our revenue for the quarter ended June 30, 2010 increased significantly from the same period the year before.  The high growth rate is also helped by the comparatively lower numbers in the same quarter last year, when the tourism industry was adversely affected by H1N1. 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 segment were $6,005,989 for the three months ended June 30, 2010 compared to $3,294,514 for the same period last year, an increase of $2,711,475, or approximately 82%. This increase is generally driven by the same factors mentioned above, but more specifically, a result of the increased demand for air passenger transportation and higher ticket prices. We attribute the higher air ticket prices to the booming tourism, general inflation in Chinese economy, as well as the airlines acting together on pricing. As China’s economy recovers, we believe that our growth in air-ticketing is sustainable in the coming quarters.

Revenue from hotel reservations segment were $3,018,872 for the three months ended June 30, 2010 compared to $2,714,144 for the same period in 2009, an increase of $304,728, or approximately 11%. This increase is a result of the factors mentioned above for air tickets and the successful cross marketing of our various business segments. For this specific segment, we expect higher reservation volumes and higher revenue growth in the coming quarters, after our partnership with Agoda to leverage its global brand awareness and international hotel network.

Revenue from our packaged tour segment were $27,716,751 for the three months ended June 30, 2010, compared to $12,396,815 for the same period in 2009, an increase of $15,319,936, or approximately 124%. Excluding the effect of the five newly acquired subsidiaries, which was $11,643,472, our revenues from this segment were $16,073,279 for the three months ended June 30, 2010, compared to $12,396,815, for the same period in 2009, an increase of $3,676,465, or approximately 24%. This increase is a result of the recovery of Chinese economy, the government’s stimulus package, and our strong efforts in carrying our various marketing programs.

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.

44

Costs of services for the three months ended June 30, 2010 were $26,188,474 compared to $11,875,779 for the same period in 2009, an increase of $14,312,695, or approximately 121%. The comparatively higher costs of services resulted from packaged tours making up a greater percentage of our total revenue and their corresponding higher cost of services. Excluding the costs of services for the five newly acquired subsidiaries, which was $ 9,821,767, costs of services for the three months ended June 30, 2010 were $16,366,707, compared to $11,875,779, for the same period 2009, an increase of $4,490,928, or approximately 38%. The increase is in tandem with the increase in revenue. 

Costs of services from air-ticketing were $1,127,183 for the three months ended June 30, 2010, compared to $349,173 for the same period last year, an increase of $778,010, or approximately 223%. This increase is associated with anew foundedsubsidary in June2009 which has much more business transactions in this period than the same period last year and the much higher increase in revenue in this segment.

Costs of services from hotel-reservation were $1,071,350 for the three months ended June 30, 2010, compared to $910,164 for the same period last year, an increase of $161,186, or approximately 18%. The increase is in tandem with the increase of revenue.

Costs of services from packaged-tour were $23,989,941 for the three months ended June 30, 2010, compared to $10,616,442 for the same period last year, an increase of $13,373,499 or approximately 126%. The increase is in tandem with the increase of revenue. Excluding the effect of the costs of services for the five newly acquired subsidiaries, which was $9,821,769, our costs of services from this segment were $14,168,172, for the three months ended June 30, 2010 compared to $10,616,442, for the same period in 2009, an increase of $3,551,730, or approximately 34%. The increase is also in tandem with the increase of revenue in this segment. 

Gross Profit

Gross profit for the three months ended June 30, 2010 was $10,553,139, compared to $6,529,694, for the same period 2009, an increase of $4,023,445, or approximately 62%. 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 $4,878,806 for the three months ended June 30, 2010, compared to $2,945,341 for the same period last year, an increase of $1,933,465, or approximately 66%. Gross profit margin for the three months ended June 30, 2010 was 81%, slightly lower than 89.4% for the same period in 2009. The continued strong growth in gross profit for this segment was mainly attributable to the increased demand for air passenger transportation. The higher air ticket prices are a result of the booming tourism in China, the general inflation in Chinese economy, as well as the airlines acting together to determine pricing. The slight decrease in gross margin was due to the new establishment of our Chongqing subsidiary in June 2009, which has higher cost of operations due to its smaller size.

Gross profit in our hotel reservation segment was $1,947,522 for the three months ended June 30, 2010 compared to $1,803,980 for the same period last year, an increase of $143,542, or approximately 8%. Gross profit margin in this segment for the three months ended June 30, 2010 was 64.5% compared to 66.5% for the same period 2009, a decrease of approximately 2%. The slightly decreased gross profit margin is mostly due to the reclassification of the costs associated.

Gross profit in our packaged tour segment was $3,726,811 for the three months ended June 30, 2010 compared to $1,780,373 for the same period last year, an increase of $1,946,438, or approximately 109%.  Gross profit margin in this segment for the three months ended June 30, 2010 was 13% compared to 14.4% for the same period 2009, a decrease of 1.4%.  The reason for the lower overall gross profit margin is that we had to consolidate the five newly acquired subsidiaries in this segment and they had lower gross profit margins due to their smaller size generally. Although currently these subsidiaries have lower profit margins than the existing subsidiaries, we believe that they have great potential to improve, and their strong local networks are critical in our nationwide expansion strategy.

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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 generate 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.

Consolidated gross margin for the three months ended June 30, 2010 came in at 28.7%, a 6.8% decrease from the 35.5% the Company posted in the same period last year. The lower gross margin is mainly due to our changes in revenues mix. Due to the difference in revenues recognition, our packaged tour has lower gross margin. During the three months ended June 30, 2010, revenues generated from packaged tours, which have a smaller profit-margin, grew at a much higher rate than revenues generated from air ticketing and hotel reservations, leading to lower overall gross margin.

Selling, General and Administrative Expenses

Major selling, general, and administrative expenses for the three months ended June 30, 2010 and 2009 are as follows:

	For the three months ended June 30,
	2010		2009
Business related tax	$	203,485	$	172,547
Salary and commission		1,782,021		744,230
Marketing		120,241		508
Rent		93,355		44,151
Depreciation and amortization		384,002		10,655
Professional fees		394,245		85,742
Stock-based compensation		340,372		330,724
Other general and administrative expenses		143,316		176,362
Total	$	3,461,037	$	1,564,919

Selling, general and administrative expenses totaled $3,461,037 for three months ended June 30, 2010 compared to $1,564,919 for the same period last year, an increase of approximately 121%.

Selling, general and administrative expenses were approximately 9.4% of revenue for the three months ended June 30, 2010 as compared to 8.5% for 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 June 30, 2010, as compared to the same period of last year. During the second quarter of 2010, we incurred extra professional fees and consolidation expenses for the aforesaid mergers and acquisitions, as well as for the $20 million of common stock offering in June. To promote our businesses, especially the packaged tour programs, we spent $120,241 on  advertisements this quarter when we did not incur so much last year. In the second half of 2009, we established two subsidiaries, Chongqing Universal Travel E-Business Co., Ltd and Shenzhen Universal Travel Agency Co. Ltd. Depreciation and amortization expenses of these two newly established companies, have been taken into account into selling, general and administrative expenses since the third quarter of 2009.

Other Income (Expenses)

Gain on change in fair value of derivative liability for the three months ended June, 2010 was $839,553 compared to a loss of $5,819,481 for same period last year. The Company adopted Derivative and Hedging, ASC 815-40 effective January 1, 2009. The warrants issued in connection with the “Securities Purchase Agreement” dated August 28, 2008 were reclassified from equity to derivative liability and marked to market.  Therefore, the Company recorded a gain on change in fair value of derivative liability of $839,553 on June 30, 2010 to mark to market for the decrease in fair value of the warrants from April 1, 2010 to June 30, 2010.

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Net Income

Net income was $6,044,198, or 16.5% of revenues for the three months ended June 30, 2010, compared to a loss of $2,585,025 for the same period last year. The significant increase in net income is mostly due to our efforts to expand our business, our merger and acquisition strategy, as well as the non-cash gain on change in fair value of derivative liability and the effect of the discontinued operation.

SIX MONTHS ENDED JUNE, 2010 AND 2009

The following table presents certain consolidated statement of operations information derived from the consolidated statements of income for the six months ended June 30, 2010 and 2009 respectively.

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

	Six months ended  June 30, 2010			Six months ended  June 30, 2009			Increase /  Decrease			Percentage
Revenues	$	62,871,619		$	33,916,152		$	28,955,467			85	%
Cost of Services		(43,816,506	)		(21,614,152	)		(22,201,857	)		103	%
Gross Profit		19,055,113			12,301,503			6,753,610			55	%
SG&A		(6,524,679	)		(3,097,716	)		(3,426,962	)		111	%
Income from Operations		12,530,434			9,203,787			3,326,648			36	%
Other income		6,917			6,419			498			8	%
Gain on change in fair value of derivative liabilities		949,004			(5,706,217	)		6,655,221			N/M
Interest income		40,712			23,296			17,416			75	%
Income before income taxes		13,527,068			3,527,285			9,999,783			283	%
Provision for income taxes		(3,393,028	)		(2,138,151	)		(1,254,877	)		59	%
Income (Loss)  from continuing operations		10,134,039			1,389,134			8,744,905			630	%
Income from discontinued operations					177,975
Loss on disposition of discontinued operations					(770,595	)
Net  Income		10,134,039			796,514			9,337,525			1172	%

For the six months ended June 30, 2010:

Revenue Segment	Air tickets  (YZL &  CTE)			(%) of  sector			Hotel (SLB)			(%) of  sector			Tours  (All Others)			(%) of  sector			Total
Revenue	$	10,442,953			16.6	%		6,169,248			9.8	%		46,259,418			73.6	%		62,871,619
Cost of Services		(1,929,772	)		4.4	%		(2,160,523	)		4.9	%		(39,726,211	)		90.7	%		(43,816,506	)
Gross Profit	$	8,513,181			44.7	%		4,008,725			21.0	%		6,533,207			34.3	%		19,055,113
Gross Margin		81.5	%					65.0	%					14.1	%					30.3	%
Segment effect in Gross Margin (*)		13.5	%					6.4	%					10.4	%					30.3	%

For the six months ended June 30, 2009:

Revenue Segment	Air tickets  (YZL)			(%) of  sector			Hotel (SLB)			(%) of  sector			Tours  (All Others)			(%) of  sector			Total
Revenue	$	6,045,642			17.8	%		5,230,975			15.4	%		22,639,535			66.8	%		33,916,152
Cost of Services		(651,979	)		3.0	%		(1,683,627	)		7.8	%		(19,279,043	)		89.2	%		(21,614,649	)
Gross Profit	$	5,393,663			43.8	%		3,547,348			28.8	%		3,360,492			27.3	%		12,301,503
Gross Margin		89.2	%					67.8	%					14.8	%					36.3	%
Segment effect in Gross Margin (*)		15.9	%					10.5	%					9.9	%					36.3	%

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 (*) "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. Our hotel reservation segment relates to Shanghai Lanbao Travel Service Co., Ltd. Our packaged tours segment relates to the remaining eight operating subsidiaries: Foshan International Travel Service Co., Ltd, Xi’an Golden Net Travel Serve Service Company Limited, Shenzhen Universal Travel Agency Co. Ltd, Huangshan Holiday Travel Service Co., Ltd., Hebei Tianyuan International Travel Agency Co., Ltd, Zhengzhou Yulongkang Travel Agency Co., Ltd, Shanxi Jinyang Travel Agency Co., Ltd and Kunming Business Travel Agency Co., Ltd. Operations of each segment are exclusive to the operations of the associated subsidiary company.

Revenues for the six months ended June 30, 2010 were $62,871,619, compared to $33,916,152 for the same period 2009, an increase of $28,955,467, or approximately 85%. The contributions from the five newly acquired subsidiaries were $16,917,786, or 27% of our total revenues for these six months. Excluding this effect, revenues for the six months ended June 30, 2010 were $45,953,833, compared to $33,916,152 for the same period 2009, an increase of $12,037,681 or approximately 35%.

The acquisition of the five subsidiaries this year was primarily due to our efforts to expand our businesses, especially the packaged tour business, along with the strong demand for travel demand as a result of the recovery of Chinese economy, and the continuing effect of the Chinese government’s stimulus package.  The high growth rate is also helped by the comparatively lower numbers in the same quarter last year, when the tourism industry was adversely affected by H1N1. 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.   

Revenues from air-ticketing segment were $10,442,953 for the six months ended June 30, 2010 compared to $6,045,642 for the same period last year, an increase of $4,397,311, or approximately 73%. This increase is generally driven by the same factors mentioned above, but more specifically, a result of the increased demand for air passenger transportation and higher ticket prices. We attribute the higher air ticket prices to the booming tourism, general inflation in Chinese economy, as well as the airlines acting together on pricing. As China’s economy recovers, we believe that our growth in air-ticketing is sustainable in the coming quarters.

Revenues from hotel reservations segment were $6,169,248 for the six months ended June 30, 2010 compared to $5,230,975 for the same period in 2009, an increase of $938,273, or approximately 18%. This increase is a result of the factors mentioned above for air tickets and the successful cross marketing of our various business segments. For this specific segment, we expect higher reservation volumes and higher revenue growth in the coming quarters, after our partnership with Agoda to leverage its global brand awareness and international hotel network.

Revenues from our packaged tour segment were $46,259,418 for the six months ended June 30, 2010, compared to $22,639,535 for the same period in 2009, an increase of $23,619,883, or approximately 104%. Excluding the effect of the five newly acquired subsidiaries, which was $16,917,786, our revenues from this segment were $29,341,632 for the six months ended June 30, 2010, compared to $22,639,535, for the same period in 2009, an increase of $6,702,097, approximately 30%. This increase is a result of the recovery of Chinese economy, the government’s stimulus package, and our strong efforts in carrying our various marketing programs.

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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.

Costs of services for the six months ended June 30, 2010 were $43,816,506 compared to $21,614,649 for the same period in 2009, an increase of $22,201,857, or approximately 103%. The comparatively higher costs of services resulted from packaged tours making up a greater percentage of our total revenue and their corresponding higher cost of services . Excluding the effect of the costs of services of the five newly acquired subsidiaries, which is $14,044,492, costs of services for the six months ended June 30, 2010 were $29,772,024, compared to $21,614,649, for the same period 2009, an increase of $8,157,365, or approximately 38%. The increase is in tandem with the increase of revenue. 

Costs of services from air-ticketing were $1,929,772 for the six months ended June 30, 2010, compared to $651,979 for the same period last year, an increase of $1,277,793, or approximately 196%. The increase is in tandem with the increase of revenue, but more costs wereinccured from a newlyestablished Chongqing subsidary, which was established only in June 2009.

Costs of services from hotel-reservation were $2,160,523 for the six months ended June 30, 2010, compared to $1,683,627 for the same period last year, an increase of $476,896, or approximately 28%. The increase is in tandem with the increase of revenue, and the higher percentage increase is mostly due to our reclassification of costs.

Costs of services from packaged-tour were $39,726,211for the six months ended June 30, 2010, compared to $19,279,043 for the same period last year, an increase of $20,447,168 or approximately 106%. The increase is in tandem with the increase of revenue. Excluding the effect of the costs of services for the five newly acquired subsidiaries, which was $ 14,044,492, our costs of services from this segment were $25,681,719 for the six months ended June 30, 2010 compared to $19,279,043 for the same period in 2009, an increase of $6,402,676, or approximately 33%. The increase is also in tandem with the increase of revenue. 

Gross Profit

Gross profit for the six months ended June 30, 2010 was $19,055,113 compared to $12,301,503, for the same period 2009, an increase of $6,753,610, or approximately 55%. 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 $8,513,181 for the six months ended June 30, 2010, compared to $5,393,663 for the same period last year, an increase of $3,119,518, or approximately 58%. Gross profit margin for the six months ended June 30, 2010 was 81.5%, slightly lower than 89.4% for the same period in 2009. The continued strong growth in gross profit for this segment was mainly attributable to the increased demand for air passenger transportation. The higher air ticket prices are a result of the booming tourism in China, the general inflation in Chinese economy, as well as the airlines acting together to determine pricing. The slight decrease in gross margin was due to the consolidation of a newly established Chongqing subsidiaryfrom June 2009.

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Gross profit in our hotel reservation segment was $4,008,725 for the six months ended June 30, 2010 compared to $3,547,348 for the same period last year, an increase of $461,377, or approximately 13%. Gross profit margin in this segment for the six months ended June 30, 2010 was 65.0%, compared to 67.8% for the same period 2009, a decrease of 2.8%. The decreased gross profit margin is mostly due to the reclassification of the costs associated.

Gross profit in our packaged tour segment was $6,533,207 for the six months ended June 30, 2010 compared to $3,360,492 for the same period last year, an increase of $3,172,715, or approximately94%.  Gross profit margin in this segment for the six months ended June 30, 2010 was 14.1% compared to 14.8% for the same period 2009, a decrease of 0.7%.  The reason for the lower overall gross profit margin is that we had to consolidate the five newly acquired subsidiaries into this segment and they had lower gross profit margins due to their smaller size generally. Although currently these subsidiaries have lower profit margins than the existing subsidiaries, we believe that they have great potential to improve, and their strong local networks are critical in our nationwide expansion strategy.

Our air-ticketing and hotel reservation have much higher gross margin than our packaged tour business primarily as our revenues 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.

Consolidated gross margin for the six months ended June 30, 2010 came in at 30.3%, a 6% decrease from the 36.3% we posted in the same period last year. The lower gross margin is mainly due to our changes in revenues mix. Due to the difference in revenues recognition, our packaged tour has lower gross margin. During the six months ended June 30, 2010, revenues generated from packaged tours, which have a smaller profit-margin, grew at a much higher rate than revenues generated from air ticketing and hotel reservations, leading to lower overall gross margin.

Selling, General and Administrative Expenses

Major selling, general, and administrative expenses for the six months ended June 30, 2010 and 2009 are as follows:

	For the six months ended June 30,
	2010		2009
Business related tax	$	359,063	$	261,233
Salary and commission		2,880,472		1,465,152
Marketing		195,339		38,855
Rent		196,029		82,671
Depreciation and amortization		645,905		19,074
Professional fees		659,250		341,676
Stock-based compensation		677,004		495,725
Other general and administrative expenses		911,617		402,330
Total	$	6,524,679	$	3,097,716

Selling, general and administrative expenses totaled $6,524,679 for six months ended June 30, 2010 compared to $3,097,716 for the same period last year, an increase of approximately 111%.

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Selling, general and administrative expenses were approximately 10.4% of revenue for the six months ended June 30, 2010 as compared to 9.1% for the same period last year. General increase in selling, general and administrative expenses are in connection with the growth in business operations during the six months ended June 30, 2010, as compared to the same period of last year. During the first half of 2010, we incurred extra professional fees and consolidation expenses for the aforesaid mergers and acquisitions, as well as for the $20 million of common stock offering in June. To promote our businesses, especially the packaged tour programs, we spent $195,339 of advertisements in the first two quarters of 2010, while we did not incur so much for the same period last year. In the second half of 2009, we established two subsidiaries, Chongqing Universal Travel E-Business Co., Ltd and Shenzhen Universal Travel Agency Co. Ltd. Depreciation and amortization expenses of these two newly established companies have been taken into account since the third quarter of 2009.

Other Income (Expenses)

Gain on change in fair value of derivative liability for the six months ended June, 2010 was $949,004 compared to a loss of $5,706,217 for same period last year. The Company adopted Derivative and Hedging, ASC 815-40 effective January 1, 2009. The warrants issued in connection with the “Securities Purchase Agreement” dated August 28, 2008 were reclassified from equity to derivative liability and marked to market.  Therefore, the Company recorded a gain on change in fair value of derivative liability of $949,004 on June 30, 2010 to mark to market for the decrease in fair value of the warrants from January 1, 2010 to June 30, 2010.

Net Income

Net income was $10,134,039, or 16.1% of revenues for the six months ended June 30, 2010, compared to $796,514, or 4.1% of revenues for the same period last year. The significant increase in net income is mostly due to our efforts to expand our business, our merger and acquisition strategy, as well as the non-cash gain on change in fair value of derivative liability and the effect of the discontinued operation.

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 $43,591,459 as of June 30, 2010. Current assets and current liabilities as of June 30, 2010 were $86,184,528 and $10,771,024, respectively, yielding working capital of $75,413,504. We believe that the funds available to us from operations are adequate to meet our operating needs in 2010. For the six months ended June 30, 2010, net cash provided by operating activities was approximately $4,546,144, which resulted primarily from our organic operations and effective management of cash flow.

Capital expenditure

Total capital expenditure for six months ended June 30, 2010 was $1,864,774 to purchase fixed assets, primarily machinery and equipment, such as TRIPEASY kiosks. 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. To satisfy these capital needs due to our broad expansion in PRC, as well as to set up more TRIPEASY kiosks, we may incur additional capital expenditure.

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We 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. In December 15, 2009, we closed Subscription Agreements with certain investors to sell to them an aggregate of 2,222,222 shares of common stocks for a consideration of $20 million. We also closed another common stock public offering transaction on June 16, 2010. In this transaction we issued 2,857,143 shares of common stocks for an aggregate amount of $20 million.

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

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

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

Changesin internal control over financial reporting

There have been no changes in our internal controls over financial reporting duringour second fiscal quarter that have materially affected, or are reasonablylikely to materially affect, our internal control over financialreporting.

PARTII - OTHER INFORMATION

Item1.   Legal Proceedings.

There is no material legal proceeding pending againstus.

Item1A. Risk Factors

Not Applicable.

Item2.   Unregistered Sales of Equity Securities and Use ofProceeds

None.

Item 3.     Defaults Upon SeniorSecurities

None.

Item4.   (Removed and Reserved).

None.

Item 5.     Other Information

Not applicable.

Item 6.     Exhibits

Copies ofthe following documents are included as exhibits to this report pursuant to Item601 of Regulation S-K.

Exhibit No.	SEC Ref. No.	Title of Document
1	31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
2.	31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002

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3	32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
4	32.2	Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

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

SIGNATURES

Inaccordance with the Exchange Act, the registrant caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

Date:August 24, 2010

UNIVERSAL TRAVEL GROUP
By:	/s/ Jiangping Jiang
	Jiangping Jiang
	Chairwoman and Chief Executive Officer
	(Principal Executive Officer)

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

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