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EX-32.1 - EXHIBIT 32.1 - China TransInfo Technology Corp.ctransin111309exh321.htm
EX-10.2 - EXHIBIT 10.2 - China TransInfo Technology Corp.ctransin111309exh102.htm
EX-10.3 - EXHIBIT 10.3 - China TransInfo Technology Corp.ctransin111309exh103.htm
EX-32.2 - EXHIBIT 32.2 - China TransInfo Technology Corp.ctransin111309exh322.htm
EX-31.1 - EXHIBIT 31.1 - China TransInfo Technology Corp.ctransin111309exh311.htm
EX-31.2 - EXHIBIT 31.2 - China TransInfo Technology Corp.ctransin111309exh312.htm
EX-10.1 - EXHIBIT 10.1 - China TransInfo Technology Corp.ctransin111309exh101.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2009

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

For the transition period from ____________ to _____________

Commission File Number: 001-34134

CHINA TRANSINFO TECHNOLOGY CORP.
(Exact Name of Registrant as Specified in Its Charter)

Nevada     87-0616524
(State or other jurisdiction of   (I.R.S. Empl. Ident. No.)
incorporation or organization)    

07 Floor E-Wing Center
No. 113 Zhichunlu, Haidian District
Beijing, China 100086
(Address of principal executive offices, Zip Code)

(86) 10-82671299
(Registrant’s telephone number, including area code)

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

Yes x               No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  

Yes £               No £

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

Large accelerated filer   £ Accelerated filer   £
Non-accelerated filer £ Smaller reporting company  x
(Do not check if a smaller reporting company)  

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

Yes £               No x

The number of shares outstanding of each of the issuer’s classes of common equity, as of November 12, 2009 is as follows:

Class of Securities   Shares Outstanding
Common Stock, $0.001 par value   22,452,745

 


TABLE OF CONTENTS

  PART I Page

Item 1.

Financial Statements

1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

 

PART II

 

Item 1.

Legal Proceedings

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 3.

Defaults Upon Senior Securities

41

Item 4.

Submission of Matters to a Vote of Securities Holders

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

 

 

i


PART I.
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Page

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008

2

Unaudited Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2009 and 2008

4

Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the Nine Months Ended September 30, 2009

5

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008

6-7

Notes to Unaudited Condensed Consolidated Financial Statements

8-25

 

 

 

1


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

September 30, 2009

 

 

December 31, 2008

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

       Cash and cash equivalents

$

 21,125,873

 

$

 16,122,464

 

       Restricted cash

 

2,261,141

 

 

1,209,542

 

       Accounts receivable, net

 

15,313,210

 

 

7,735,742

 

       Inventory

 

301,140

 

 

23,775

 

       Cost and estimated earnings in excess of billings on

 

 

 

 

 

 

                   uncompleted contracts

 

28,066,671

 

 

11,912,285

 

       Prepayments

 

9,709,570

 

 

3,647,731

 

       Other receivable

 

8,575,034

 

 

2,940,404

 

       Deferred tax assets

 

218,417

 

 

211,708

 

       Other current assets

 

903,644

 

 

-

 

                           Total current assets

 

86,474,700

 

 

43,803,651

 

Long-term investments

 

6,990,560

 

 

278,730

 

Property and equipment, net

 

9,786,144

 

 

9,874,005

 

Intangible assets, net

 

4,097,928

 

 

1,490,807

 

Goodwill

 

9,834,668

 

 

3,095,017

 

Other non-current assets

 

439,449

 

 

147,607

 

Total assets

$

 117,623,449

 

$

 58,689,817

 

The accompanying notes are an integral part of the financial statements.

2


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

Continued:

 

 

September 30, 2009

 

 

December 31, 2008

 

 

 

(Unaudited)

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

     Accounts payable

$

 20,959,687

 

$

 5,518,402

 

     Notes payable

 

7,481,700

 

 

2,934,000

 

     Due to related parties

 

73,946

 

 

528,485

 

     Billings in excess of costs and estimated earnings on

 

 

 

 

 

 

               uncompleted contracts

 

12,066,028

 

 

846,971

 

     Deferred revenue

 

129,220

 

 

214,256

 

     Other payable

 

4,653,184

 

 

149,282

 

     Accrued liabilities

 

1,993,930

 

 

881,484

 

                     Total current liabilities

 

47,357,695

 

 

11,072,880

 

Long-term liability

 

668,219

 

 

-

 

Total Liabilities

 

48,025,914

 

 

11,072,880

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

     China TransInfo Technology Corp.

 

 

 

 

 

 

               Preferred stock, par value $0.001 per share, 10,000,000 shares

 

 

 

 

 

 

                      authorized and 0 shares issued and outstanding

 

-

 

 

-

 

               Common stock, par value $0.001 per share, 150,000,000 shares authorized ,

 

 

 

 

 

 

                      22,402,989 and 22,187,314 issued and outstanding, respectively

 

22,403

 

 

22,187

 

               Additional paid-in capital

 

24,930,192

 

 

24,654,890

 

               Retained earnings

 

27,197,830

 

 

18,974,224

 

               Accumulated other comprehensive gain - translation adjustments

 

2,111,304

 

 

2,499,893

 

                     Total China TransInfo Technology Corp. shareholders' equity

 

54,261,729

 

 

46,151,194

 

     Noncontrolling interest

 

15,335,806

 

 

1,465,743

 

Total stockholders' equity

 

69,597,535

 

 

47,616,937

 

Total liabilities and stockholders' equity

$

 117,623,449

 

$

 58,689,817

 

The accompanying notes are an integral part of the financial statements.

3


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2009

 

 

2008

 

 

2009

 

 

2008

 

Revenues

$

 19,165,553

 

$

 8,913,514

 

$

 35,256,869

 

$

 18,685,813

 

Cost of revenues

 

11,809,948

 

 

3,979,049

 

 

19,896,690

 

 

8,258,137

 

Gross profit

 

7,355,605

 

 

4,934,465

 

 

15,360,179

 

 

10,427,676

 

Operating Expenses

 

3,097,483

 

 

1,607,712

 

 

6,797,818

 

 

3,085,992

 

Income from operations

 

4,258,122

 

 

3,326,753

 

 

8,562,361

 

 

7,341,684

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

               Interest income

 

18,909

 

 

23,575

 

 

51,392

 

 

50,759

 

               Interest expense

 

(42,038

)

 

(66,066

)

 

(132,027

)

 

(75,983

)

               Subsidy income

 

188,829

 

 

305,804

 

 

308,113

 

 

305,804

 

               Other incomes - net

 

52,433

 

 

4,239

 

 

59,301

 

 

-

 

                        Total other income (expense)

 

218,133

 

 

267,552

 

 

286,779

 

 

280,580

 

Net income before income taxes

 

4,476,255

 

 

3,594,305

 

 

8,849,140

 

 

7,622,264

 

Income tax expenses:

 

 

 

 

 

 

 

 

 

 

 

 

               Current

 

94,980

 

 

-

 

 

109,946

 

 

-

 

               Deferred

 

(9,116

)

 

109,864

 

 

-

 

 

49,971

 

                        Total income tax expense (benefit)

 

85,864

 

 

109,864

 

 

109,946

 

 

49,971

 

Net income including noncontrolling interest

 

4,390,391

 

 

3,484,441

 

 

8,739,194

 

 

7,572,293

 

Less: Net income attributable to noncontrolling interests

 

415,114

 

 

386,900

 

 

515,588

 

 

601,691

 

Net income attributable to CTFO

$

 3,975,277

 

$

 3,097,541

 

$

 8,223,606

 

$

 6,970,602

 

Weighted average CTFO shares of outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

                 Basic

 

22,333,000

 

 

21,325,245

 

 

22,245,288

 

 

20,175,820

 

                 Diluted

 

22,579,496

 

 

21,522,431

 

 

22,485,924

 

 

20,393,171

 

Earnings per share attributable to CTFO common shareholders -

 

 

 

 

 

 

 

 

 

 

 

 

                 Basic

$

 0.18

 

$

 0.15

 

$

 0.37

 

$

 0.35

 

                 Diluted

$

 0.18

 

$

 0.14

 

$

 0.37

 

$

 0.34

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

               Net income including noncontrolling interest

$

 4,390,391

 

$

 3,484,441

 

$

 8,739,194

 

$

 7,572,293

 

               Translation adjustments

 

(283,124

)

 

47,347

 

 

(388,589

)

 

1,375,751

 

Comprehensive income

$

 4,107,267

 

$

 3,531,788

 

$

 8,350,605

 

$

 8,948,044

 

               Comprehensive income attributable to noncontrolling interest

$

 415,114

 

$

 386,900

 

$

 515,588

 

$

 601,691

 

               Comprehensive income attributable to CTFO

$

 3,692,153

 

$

 3,144,888

 

$

 7,835,017

 

$

 8,346,353

 

The accompanying notes are an integral part of the financial statements.

4


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Accumulated 

 

 

 

 

 

 

 

 

 


Common Stock

 

 

Additional
Paid-In
Capital

 

 

Retained
Earnings

 

 

Other
Comprehensive
Gain

 

 

Non -
controlling
Interest

 

 

Total
Stockholders'
Equity

 

 

Shares

 

 

Amount

Balance, January 1, 2008

 

19,601,107

 

$

 19,601

 

$

 10,905,114

 

$

 7,883,747

 

$

 887,184

 

$

 655,876

 

$

 20,351,522

 

Issuances of common Stock

 

2,586,207

 

 

2,586

 

 

14,997,414

 

 

 

 

 

 

 

 

 

 

 

15,000,000

 

Paid transaction cost debit to APIC

 

 

 

 

 

 

 

(1,794,660

)

 

 

 

 

 

 

 

 

 

 

(1,794,660

)

Stock-based compensation

 

 

 

 

 

 

 

217,756

 

 

 

 

 

 

 

 

 

 

 

217,756

 

Effect of subsidiary equity transactions

 

 

 

 

 

 

 

329,266

 

 

 

 

 

 

 

 

(329,266

)

 

 

 

Increase in noncontrolling interest of newly acquired subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

374,932

 

 

374,932

 

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

1,612,709

 

 

 

 

 

1,612,709

 

Net income for the year

 

 

 

 

 

 

 

 

 

 

11,090,477

 

 

 

 

 

764,201

 

 

11,854,678

 

Balance, January 1, 2009

 

22,187,314

 

 

22,187

 

 

24,654,890

 

 

18,974,224

 

 

2,499,893

 

 

1,465,743

 

 

47,616,937

 

Reduction of noncontrolling interest due to restructuring

 

 

 

 

 

 

 

126,078

 

 

 

 

 

 

 

 

(126,078

)

 

-

 

Paid transaction cost debit to APIC

 

 

 

 

 

 

 

(32,500

)

 

 

 

 

 

 

 

 

 

 

(32,500

)

Issuance of common stock on cashless exercise of warrants

 

140,675

 

 

141

 

 

(141

)

 

 

 

 

 

 

 

 

 

 

-

 

Issuance of restricted shares

 

75,000

 

 

75

 

 

(75

)

 

 

 

 

 

 

 

 

 

 

-

 

Stock-based compensation

 

 

 

 

 

 

 

181,940

 

 

 

 

 

 

 

 

 

 

 

181,940

 

Increase in noncontrolling interest of newly acquired subsidiaries including a subsidiary's subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,597,819

 

 

13,597,819

 

Minority shareholder's capital contribution pursuant to capital increase in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87,960

 

 

87,960

 

Cash dividends distributed by subsidiary of subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(205,226

)

 

(205,226

)

Translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

(388,589

)

 

 

 

 

(388,589

)

Net income for the period (unaudited)

 

 

 

 

 

 

 

 

 

 

8,223,606

 

 

 

 

 

515,588

 

 

8,739,194

 

Balance, September 30, 2009

 

22,402,989

 

$

 22,403

 

$

 24,930,192

 

$

 27,197,830

 

$

 2,111,304

 

$

 15,335,806

 

$

 69,597,535

 

The accompanying notes are an integral part of the financial statements.

5


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Nine Months Ended September 30,

 

 

 

2009

 

 

2008

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income, including noncontrolling interest

$

 8,739,194

 

$

 7,572,293

 

Adjustments to reconcile net income to

 

 

 

 

 

 

     net cash provided by (used in) operating activities:

 

 

 

 

 

 

             Depreciation and amortization expenses

 

881,349

 

 

105,261

 

             Stock-based compensation

 

181,940

 

 

156,769

 

             Investment gain realized based on the equity method

 

(39,067

)

 

-

 

             Loss on disposal of fixed assets

 

500

 

 

-

 

             (Increase) Decrease in assets:

 

 

 

 

 

 

                     Restricted cash

 

(35,247

)

 

255,004

 

                     Deferred income tax

 

-

 

 

49,971

 

                     Accounts receivable

 

(1,965,896

)

 

(1,982,894

)

                     Prepayments

 

(169,599

)

 

(1,785,122

)

                     Other receivable

 

(2,058,231

)

 

247,170

 

                     Cost and estimated earnings

 

 

 

 

 

 

                             in excess of billings on uncompleted contracts

 

(10,543,333

)

 

(4,310,591

)

                     Inventory

 

(255,245

)

 

(558,135

)

                     Other current assets

 

(173,000

)

 

(211,063

)

             Decrease (Increase) in liabilities:

 

 

 

 

 

 

                     Accounts payable

 

3,788,025

 

 

2,629,577

 

                     Billings in excess of costs

 

 

 

 

 

 

                           and estimated earnings on uncompleted contracts

 

(978,605

)

 

(1,066,454

)

                     Deferred revenue

 

105,595

 

 

21,944

 

                     Other payable

 

6,941

 

 

43,733

 

                     Accrued liabilities

 

143,283

 

 

151,951

 

Net cash provided by (used in) operating activities

 

(2,371,396

)

 

1,319,414

 

The accompanying notes are an integral part of the financial statements.

6


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Continued:

 

 

Nine Months Ended September 30,

 

 

 

2009

 

 

2008

 

Cash flows from investing activities:

 

 

 

 

 

 

     Cash from acquisitions

$

12,210,500

 

$

 288,690

 

     (Increase) in loan to others

 

-

 

 

(229,392

)

     Cash used for long-term investment

 

(475,685

)

 

-

 

     (Increase) in other non-current assets

 

(291,622

)

 

(27,747

)

     Proceeds from disposal of property, plant and equipment

 

1,156

 

 

-

 

     Purchases of property and equipment

 

(256,440

)

 

(4,029,102

)

     Purchases of intangible assets and goodwill

 

(4,692,658

)

 

(1,377,044

)

Net cash provided by (used in) investing activities

 

6,495,251

 

 

(5,374,595

)

Cash flows from financing activities:

 

 

 

 

 

 

     Proceeds from short-term borrowings

 

4,397,700

 

 

2,715,713

 

            Minority interest in subsidiaries accumulated prior to acquisition

 

(3,951,779

)

 

(109,457

)

     Payable for acquiring subsidiary

 

3,254,298

 

 

48,815

 

     Minority shareholders' capital contribution

 

87,954

 

 

-

 

     Payment of dividends

 

(1,871,613

)

 

-

 

     Proceeds from issuing shares

 

-

 

 

15,000,000

 

     Paid transaction cost debit to APIC

 

(32,500

)

 

(1,791,908

)

     Payments to related parties

 

(454,198

)

 

-

 

     Decrease in customer deposit

 

(190,567

)

 

143,370

 

Net cash provided by financing activities

 

1,239,295

 

 

16,006,533

 

Effect of foreign currency exchange translation

 

(359,741

)

 

295,344

 

Net increase in cash

 

5,003,409

 

 

12,246,696

 

Cash - beginning

 

16,122,464

 

 

6,842,238

 

Cash - ending

$

21,125,873

 

$

 19,088,934

 

Supplemental disclosures:

 

 

 

 

 

 

     Interest paid

$

129,839

 

$

 69,102

 

     Income taxes paid

$

20,367

 

$

 -

 

The accompanying notes are an integral part of the financial statements.

7


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

1.

GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business—China TransInfo Technology Corp., or the Company, we, or us, was originally incorporated in Nevada on August 3, 1998, under the name R & R Ranching, Inc. to breed bison. In about March 2003, R & R Ranching Inc. sold its bison to Blue Sky Bison Ranch, Ltd.

The Company has experienced several corporate name changes: GloTech Industries, Inc. in March 2003, Intra-Asia Entertainment Corporation in December 2003, and China TransInfo Technology Corp. in August 2007.

On May 14, 2007, the Company entered into a share exchange agreement with Cabowise International Ltd., or Cabowise, a British Virgin Islands company, the stockholders of Cabowise, Weicheng International Inc. and Foster Growth Ltd. Pursuant to the share exchange agreement, the Company, among other things, agreed to issue to the stockholders of Cabowise an aggregate of 10,841,491 shares of its common stock in exchange for all of the issued and outstanding capital stock of Cabowise. In addition, Cabowise agreed to assign its option to purchase a majority equity interest in Beijing PKU Chinafront High Technology Co., Ltd, or PKU, to the Company’s indirect Chinese subsidiary Oriental Intra-Asia Entertainment (China) Limited, or Oriental Intra-Asia.

Cabowise does not have any subsidiaries nor is it engaged in any business. Cabowise’s sole asset was its option to purchase an eighty-five percent (85%) interest in PKU,or the PKU Option. Pursuant to the share exchange agreement, Cabowise agreed to assign the PKU Option to Oriental Intra-Asia. On May 14, 2007, Cabowise, the Company and Oriental Intra-Asia entered into an assignment and assumption agreement whereby Cabowise assigned the PKU Option to Oriental Intra-Asia. On May 14, 2007, Oriental Intra-Asia exercised the PKU Option, and Oriental Intra-Asia became the owner of an eighty-five percent (85%) equity interest in PKU.

The exchange of shares has been accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of the PKU obtained control of the consolidated entity. Accordingly, the merger of the two companies has been recorded as a recapitalization of PKU, with PKU being treated as the continuing entity. The historical financial statements presented are those of PKU. The continuing company has retained December 31 as its fiscal year end.

During August 2007, the Company completed a 1-for-7.5 reverse split of all issued and outstanding shares of common stock. The capital stock accounts and all share data in this report give effect to the reverse split, applied retroactively, for all periods presented.

PKU is in the business of providing Geography Information System, or GIS, application services to the Chinese governments in the sectors of Transportation, Land and Resources, and Digital City. PKU offers GIS application services that cover GIS system planning, deployment, system construction, data testing, system audit and optimization, user’s manual and customer training, through self-developed GIS platform software products applicable for two-dimension and three-dimension system models. PKU was incorporated in Beijing, China on October 30, 2000.

In addition to PKU, the Company has the following operating variable interest entities:

  • Beijing Tian Hao Ding Xin Science and Technology Co., Ltd., or Beijing Tian Hao, was established on December 31, 2005 with registered capital of RMB 5 million. Beijing Tian Hao is engaged in the business of GIS application research and development.

  • Beijing Zhangcheng Science & Technology Co., Ltd., or Beijing Zhangcheng Science, was established on October 12, 2007 with registered capital of RMB 10 million. Beijing Zhangcheng is engaged in the business of GIS application development for real time traffic information reporting.

  • Beijing Zhangcheng Culture and Media Co., Ltd., or Zhangcheng Media, was set up on June 8, 2008 with registered capital of RMB 5 million. Zhangcheng Media is mainly engaged in taxi media advertising business.

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CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

  • Shanghai Yootu Information Technology Co., Ltd., or Shanghai Yootu, was established on February 6, 2007 with registered capital of RMB 2 million. Shanghai Yootu is engaged in the business of real time traffic data application research and development.

  • Xingjiang Zhangcheng Science and Technology Co., Ltd., or Xinjiang Zhangcheng, was established on January 25, 2008 with registered capital of RMB 10 million. Xinjiang Zhangcheng is mainly engaged in taxi media advertising business.

  • China TranWiseway Technology Co., Ltd., or China TranWiseway, was established on June 28, 2004 with registered capital of RMB 0.5 million. China TranWiseway is engaged in the business of traffic surveying technology applications.

  • Dalian Dajian Zhitong Information Service Ltd., or Dajian Zhitong, was established on June 9, 2006 with registered capital of RMB 1 million. Dalian Dajian is mainly engaged in taxi media advertising business.

On September 8, 2009, Mr. Shudong Xia, Chairman and Chief Executive Officer of the Company, executed agreement to acquire a 35.17% equity interest in Beijing UNISITS Technology Co. Ltd., or UNISITS from Unisplendour Corporation Limited, or Unisplendour, with a cash payment of RMB 44.4 million (approximately $6.53 million). Subsequently, on September 8, 2009, China TransInfo Technology Group Co., Ltd., or the Group Company, a variable interest entity of the Company entered into an option agreement with Mr. Xia, under which Mr. Xia granted to the Group Company a perpetual option to acquire all of Mr. Xia's equity interest in UNISITS for RMB 44.4 million, which is the exercise price. The exercise price of the option was prepaid upon the granting of the option. Concurrently, the Group Company acquired from Mr. Xia the rights to his share of all future UNISITS dividends or other distributions. Mr. Xia pledged his equity interest in UNISITS to the Group Company for five years. The Group Company expects to exercise the option and take title to the equity interest now held by Mr. Xia upon the expiration of the five-year term of the pledge agreement when the option first becomes exercisable. In September 2009, the Group Company and four of five board directors of UNISITS entered into an Acting in Concert Agreement. The agreement allows the Group Company to govern the financial and operating policies of UNISITS and therefore to obtain the control of UNISITS. As a result, UNISITS became a variable interest entity of the Group Company and its financials has been included in the Company’s consolidated financial statements.

UNISITS is a company organized on November 8, 2002 under the laws of the People's Republic of China, engaging in the business of providing traffic engineering E&M systems, intelligent transportation products, and intelligent transportation services (ITS) to the domestic expressway, railway, and urban transportation markets.

Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2008. Operating results for the nine-month period ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

Principles of Consolidation—The consolidated financial statements include the accounts of the Company, it's wholly owned subsidiaries Intra-Asia Entertainment (Asia Pacific) Limited, Intra-Asia Entertainment (China) Limited and Cabowise, its indirectly owned subsidiaries Oriental Intra-Asia, and the Company’s variable interest entities, or the VIE Entities, including the Group Company, PKU, Beijing Tian Hao , Beijing Zhangcheng, Xingjiang Zhangcheng, Zhangcheng Media, China TranWiseway, Dajian Zhitong, Shanghai Yootu, UNISITS, Hangzhou Ziguang Jietong Technology Co., Ltd., Hangzhou UNISITS, Henan Ziguang Jietong Technology Co., Ltd., or Henan UNISITS, and Beijing Ziguang Jinzhidun Information Technology Co., Ltd., or Beijing UNISITS. All material intercompany accounts, transactions, and profits have been eliminated in consolidation.

9


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

On February 3, 2009, the Company, through its indirect Chinese subsidiaries, Oriental Intra-Asia and PKU, entered into a series of equity transfer agreements with the Group Company, a company incorporated under Chinese law, pursuant to which the Company transferred all of its indirect equity interests in PKU and PKU's subsidiaries to the Group Company. The main purpose of this restructuring is to allow the Company to engage in online services, taxi advertising, and security and surveillance related business in China in which companies with foreign ownership, like the Company and its subsidiaries, are either prohibited or restricted from operating under the current applicable Chinese laws and regulations. Through the contractual or variable interest entity, or VIE, arrangements, the Company maintains substantial control over the VIE Entities' daily operations and financial affairs, election of their senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of the VIE Entities, the Company is entitled to consolidate the financial results of the VIE Entities in its own consolidated financial statements under ACS 810 (formerly FASB Interpretation No. 46R "Consolidation of Variable Interest Entities," or FIN 46R).

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates include accrued warranty costs, as well as revenue and costs recorded under the percentage-of-completion method. Actual results could differ from those estimates.

Cash Equivalents—The Company classifies all highly liquid investments purchased with a maturity of three months or less as cash equivalents.

Accounts Receivable—Accounts receivable are carried at original invoice amount less an estimate for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Allowance for doubtful accounts amounted to $32,395 and $32,439 at September 30, 2009 and December 31, 2008, respectively.

Long-Term Investment— The Company uses the cost method of accounting for investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20% and over which it does not have the ability to exercise significant influence. For entities in which the Company holds an interest of greater than 20% or in which the Company does have the ability to exercise significant influence, the Company uses the equity method.

Property and Equipment—Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets, usually three to seven years.

Revenue Recognition—Most of the Company’s revenues are on contracts recognized using the percentage-of-completion method, measured by the ratio of costs incurred to date to estimated total costs for each contract. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies and travels. General and administrative costs are charged to expense as incurred. Losses on contracts are recorded in full as they are identified.

For taxi media advertising revenue, the Company recognizes deferred revenue when cash is received, but the revenue has not yet been earned. Taxi media advertising revenue is billed to the customer and recognized when the advertisement is published.

Research and Development—Research and development costs represent the costs of designing, developing and testing products and are expensed as selling, general and administrative expenses as incurred if not meeting capitalization requirements. Such costs of software projects that successfully passed technological feasibility tests are capitalized and amortized when place in service.

Share-Based Payments—The Company adopted ASC 718 (formerly SFAS No. 123(R), Share-Based Payment), requires all entities to recognize compensation expense in an amount equal to the fair value of share based payments made to employees, among other requirements. Under the fair value based method, compensation cost is measured at the grant date based on the fair value of the award and is recognized on a straight-line basis over the award vesting period. Accordingly, share based payments issued to officers and directors are measured at fair value and recognized as expense over the related vesting periods.

10


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

Income Taxes—The Company accounts for income taxes in accordance with ASC 740 (formerly SFAS No. 109, Accounting for Income Taxes), which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

Impairment of Long-Lived Assets—The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, (formerly SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets). The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded. Management has determined that no impairments of long-lived assets currently exist.

Issuance of Shares by Subsidiaries—Sales of stock by a subsidiary is accounted for in accordance with ACS 810, (formerly Staff Accounting Bulletin Topic 5H, “Accounting for Sales of Stock by a Subsidiary”). The Company has adopted the capital transaction method to account for subsidiary stock sales. Accordingly, increases and decreases in the Company’s share of its subsidiary’s net equity resulting from subsidiary stock transactions are recorded on the Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Equity as increases or decreases to Additional paid-in capital.

Concentrations of Credit Risk—Financial instruments that subject the Company to credit risk consist primarily of accounts receivable, which are concentrated in a small number of customers in the Chinese governments. The Company performs ongoing credit evaluations of its customers. For the nine months ended September 30, 2009, the Company did not incur any bad debt expenses.

Statement of Cash Flows—In accordance with ACS 230 (formerly SFAS No. 95, "Statement of Cash Flows"), 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.

Translation Adjustment—The Renminbi,or RMB, the national currency of the PRC, is the primary currency of the economic environment in which the operations of China IRAE are conducted. The Company uses the United States dollar, or theU.S. dollars, for financial reporting purposes.

In accordance with ASC 230 (formerly FAS No. 52, “Foreign Currency Translation”), the Company’s results of operations and cash flows are translated at the average exchange rates during the period, assets and liabilities are translated at the exchange rates at the balance sheet dates, and equity is translated at the historical exchange rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

As of September 30, 2009 and December 31, 2008, the exchange rates between RMB(¥) and the USD were RMB¥1 = USD$0.1467 and RMB¥1 = USD$0.1467, respectively. The weighted-average rates of exchange between RMB and USD were RMB¥1 = USD$0.14659 and RMB¥1 = USD$0.14415, respectively. Total translation adjustment recognized as of September 30, 2009 and December 31, 2008 is $2,111,304 and $2,499,893, respectively.

11


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

Comprehensive Income—Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders’ equity.

Fair Value of Financial Instruments— The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments.

The carrying amounts of the Company's long-term debt approximate their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.

New Accounting Pronouncements

In June 2009, the FASB issued Accounting Standards Update No. 2009-01, “Generally Accepted Accounting Principles” (ASC Topic 105) which establishes the FASB Accounting Standards Codification (“the Codification” or “ASC”) as the official single source of authoritative U.S. generally accepted accounting principles (“GAAP”). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification.

Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASU”) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for our third-quarter 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification. In order to ease the transition to the Codification, we are providing the Codification cross-reference alongside the references to the standards issued and adopted prior to the adoption of the Codification.

In April 2009, the FASB issued FASB Staff Positions FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (ASC Topic 320-10-65). This update provides guidance for allocation of charges for other-than-temporary impairments between earnings and other comprehensive income. It also revises subsequent accounting for other-than-temporary impairments and expands required disclosure. The update was effective for interim and annual periods ending after June 15, 2009. The adoption of FAS 115-2 and FAS 124-2 did not have a material impact on the results of operations and financial condition.

In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments” (ASC Topic 320-10-65). This update requires fair value disclosures for financial instruments that are not currently reflected on the balance sheet at fair value on a quarterly basis and is effective for interim periods ending after June 15, 2009. The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and notes payable. At September 30, 2009 and December 31, 2008 the carrying value of the Companies financial instruments approximated fair value, due to their short term nature.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (ASC Topic 855). This guidance is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. It is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this guidance did not have a material impact on our consolidated financial statements. The Company evaluated all events and transactions that occurred after September 30, 2009 up through November 10, 2009. During this period no material subsequent events came to our attention.

12


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (ASC Topic 810). This updated guidance requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. It is effective for annual reporting periods beginning after November 15, 2009. We are currently evaluating the impact of the pending adoption of SFAS No. 167 on our consolidated financial statements.

In August 2009, the FASB issued ASU 2009-05, which provides additional guidance under the Fair Value Measurements and Disclosures Topic, ASC 820-10 Application to Liabilities. The guidance clarifies that the quoted price for the liability when traded as an asset in an active market is a Level 1 measurement, when no adjustment to the quoted price is required. In the absence of a Level 1 (quoted price) measurement, an entity must use one or more valuation techniques to estimate fair value in a manner consistent with the principles in ASC 820. We do not expect adoption of this guidance to have an impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued ASU 2009-14 which amended the accounting requirements under the Software Topic, ASC 985-605 Revenue Recognition. The objective of this update is to address the accounting for revenue arrangements that contain tangible products and software. Specifically, products that contain software that is “more than incidental” to the product as a whole will be removed from the scope of ASC subtopic 985-605 (previously AICPA Statement of Position 97-2). The amendments align the accounting for these revenue transaction types with the amendments under ASU 2009-13 mentioned above. The guidance provided within ASU 2009-14 is effective for fiscal years beginning on or after June 15, 2010 and allows for either prospective or retrospective application, with early adoption permitted. We are currently evaluating the impact that adoption of this guidance will have on our consolidated financial statements.

2. RESTRICTED CASH

The Company’s restricted cash balances at September 30, 2009 and December 31, 2008 were as follows:

              Exchange            
  Entity     RMB     Rate     USD   Restriction  
  September 30, 2009:                        
  PKU   ¥  8,035,879     0.1467   $  1,178,863   To facilitate banker’s acceptances and letters of guarantee  
  UNISITS     7,377,489     0.1467     1,082,278   To facilitate banker’s acceptances and letters of guarantee  
               Total   ¥  15,413,368         $  2,261,141      
  December 31, 2008:                        
         PKU   ¥  1,245,000     0.1467   $  182,642   To facilitate banker's Acceptances  
         China TranWiseway     7,000,000     0.1467     1,026,900   To facilitate capital verification  
               Total   ¥  8,245,000         $  1,209,542      

13


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

3.

COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

   

The costs and estimated earnings on uncompleted contracts were as follows:

   
      September 30, 2009     December 31, 2008  
  Costs incurred on uncompleted contracts $  53,010,137   $  16,464,203  
  Estimated earnings on uncompleted contracts   52,140,216     20,749,561  
      105,150,353     37,213,764  
  Less: billings to date   89,149,710     26,148,450  
  Total $  16,000,644   $  11,065,314  

The costs and estimated earnings on uncompleted contracts are included in the accompanying balance sheets under the following captions:

      September 30, 2009     December 31, 2008  
  Costs and estimated earnings in excess of billings on uncompleted contracts $  28,066,671   $  11,912,285  
  Billings in excess of costs and estimated earnings on uncompleted contracts   (12,066,027 )   (846,971 )
  Total $  16,000,644   $  11,065,314  

4.

PROPERTY AND EQUIPMENT

   

The following is a summary of the Company’s property and equipment:


      September 30,2009     December 31,2008  
  Automobiles $  1,541,910   $  454,659  
  Machinery and equipments   8,851,054     5,640,958  
  Furniture and fixtures   166,581     147,957  
  Prepayment for building   -     1,249,745  
  Work-in-progress   1,019,305     2,676,864  
  Total   11,578,850     10,170,183  
  Less: accumulated depreciation   (1,792,706 )   (296,178 )
  Total Property and Equipment, net $  9,786,144   $  9,874,005  

On June 2, 2007, the Company entered into an agreement to purchase an office building for approximately $1,336,000. The Company made prepayments totaling RMB 8,304,050 or $1,218,204,pursuant to the agreement. During the nine months ended September 30, 2009, the agreement was mutually terminated and the prepaid amounts were returned to the Company in full.

The Company entered an agreement with Taxi Association of City of Urumqi for installation of a global positioning system, or GPS, control system. Pursuant to the agreement, the Company will install GPS Control Terminals on the 5,220 rental and taxi cars in the city of Urumqi in exchange for rights of interior or exterior advertisements on each taxi’s rear window, top light (LED display) and interior. According to the agreement, the Company began to operate the system on October 1, 2007 for a period of 15 years. Costs incurred for installed terminals that have been inspected and accepted were recorded as Machinery and Equipment and are depreciated over a 7-year period. Costs incurred for uninstalled terminals and installed terminals that have not been inspected and accepted were recorded as work-in-progress.

In addition, on March 31, 2008, the Company signed the Agreement for Installation of Taxi GPS Monitoring System with the Urumqi City Transportation Bureau, or the Transportation Bureau, which is the higher management authority of the Taxi Association of City of Urumqi. The agreement reconfirmed the Company’s responsibility for providing to the Transportation Bureau's Passenger Transport Office with equipment for LED-based GPS monitoring, network hardware, GPS monitoring platform, and LED-based information release platform and software in exchange for the 15 years’ taxi advertising rights. The Transportation Bureau further guarantees that the Company will be its exclusive cooperation partner for a period of 15 years. No changes related to this guaranty will be made during the 15-year period.

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CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

The Company signed a contract jointly with the Huhhot Comprehensive Traffic Information Center and the Huhhot Department of Transportation Administration on January 28, 2008 to exclusively invest in and construct the LED stripe screen advertisement broadcasting system for taxis (LSABS) in the city of Huhhot. The contract is for a period of 15 years, and the Company will provide funding for LED strip screens and taxi rooftop light alterations to construct the city’s Taxi Advertising and Information Release System. Costs incurred for installed terminals that have been inspected and accepted were recorded as Machinery and Equipment and depreciated over a 7-year period. Costs incurred for uninstalled terminals and installed terminals that have not been inspected and accepted were recorded as Work-in-progress.

   

Depreciation and amortization expenses during the nine months ended September 30, 2009 and 2008 totaled $881,349 (of which $60,905 was related to intangible assets), and $105,261, respectively.

   
5.

INTANGIBLE ASSETS

   

The Company’s intangible assets as of September 30, 2009 and December 31, 2008 are summarized as follows:


      September 30, 2009     December 31, 2008  
  Existing technology $  174,573   $  174,573  
  ETC and GPS technologies   3,475,997     1,339,061  
  Highway Monitoring and Control technology   242,055     -  
  Contract backlogs   293,400     -  
  Less: accumulated amortization   (88,096 )   (22,827 )
  Total $  4,097,929   $  1,490,807  

(1) Existing Technology

China TranWiseway, one of the Company’s VIE entities, internally developed the Traffic Volume Long-Distance Monitoring and Data Center Platform technology. The useful life of the technology is estimated at 10 years.

(2) ETC and GPS Technologies

The Company purchased software from third parties for total cash consideration of $900,431. This software was integrated into an Electrical Toll collection, or ETC, non-stop toll system and GPS technology. The Company plans to distribute fully integrated ETC systems with both hardware and software included. The estimated useful life of the technology is for 10 years.

As of September 30, 2009, the Company capitalized research and development costs of $2,497,766 after establishing technical feasibilities for its real time traffic information application software (GPS Technology). Amortization of the real time traffic information technology will not start until the application is completely developed.

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CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

(3) Highway Monitoring and Control Technology

UNSITS, a VIE entity of the Company, possesses the Highway Monitoring and Control technology. The Company amortizes such asset on a straight-line basis over 10 years.

(4) Contract Backlogs

UNISITS has certain intangible assets relating to earnings-generating service contracts that were independently valuated as an intangible asset for the equity acquisition purposes. The Company amortizes such asset on a straight-line basis over 2 years.

6.

GOODWILL

   

The Company recorded ¥6,703,104 or $983,345, ¥1,293,441 or $189,748, ¥13,101,047 or $1,921,924, and ¥45,941,729 or $6,739,651 in goodwill in connection with its acquisitions (see Note 8) of equity of China TranWiseway, Dajian Zhitong, Shanghai Yootu, and UNISITS, respectively.

   

In accordance with the provisions of ASC 350-20 (formerly SFAS No. 142, "Goodwill and Other Intangible Assets", the Company performed the goodwill impairment tests. The results of the tests indicated that no impairment loss was probable because the implied fair value of goodwill related to the equity purchased exceeded the book value of the goodwill. The Company performs its annual impairment test as of the last day of the fiscal year. These impairment tests must be performed more frequently if there are triggering events.

   
7.

NOTES PAYABLE

   

On June 17, 2008, the Company entered into a loan agreement with a commercial bank in the amount of RMB 20,000,000, or $2,930,000. The loan bears an interest rate of 6.372% per annum. The loan was paid off when the agreement expired on June 17, 2009.

   

On June 22, 2009, the Company renewed the above loan agreement in the amount of RMB 20,000,000, or $2,934,000. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the People’s Bank of China from time to time and it expires on June 22, 2010.

   

On May 27, 2009, UNISITS entered into a loan agreement with a commercial bank in the amount of RMB 1,000,000, or $146,700. Interest rate is variable at 10% above the benchmark interest rate determined by the People’s Bank of China from time to time. The loan expires on May 27, 2010.

   

On September 29, 2009, the Company entered into a loan agreement with a commercial bank in the amount of RMB 30,000,000, or $4,401,000. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the People’s Bank of China from time to time and it expires on September 29, 2010.

   

For the nine months ended September 30, 2009, interest expenses totaled RMB 900,658 or $132,027.

   
8.

ACQUISITIONS

   

(1) Acquisitions of China TranWiseway, Dalian Djian and Shanghai Yootu

   

During 2008, the Company acquired 70%, 85%, and 100% ownership of China TranWiseway, Dajian Zhitong, and Shanghai Yootu, respectively. Goodwill resulting from the acquisitions was recorded at $982,005, $189,489, and $1,919,303 for China TranWiseway, Dajian Zhitong, and Shanghai Yootu, respectively.

16


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

(2) Acquisition of UNISITS

On September 8, 2009, Shudong Xia, Chairman, CEO and President of the Company, entered into an equity transfer agreement with Unisplendour, pursuant to which Mr. Xia acquired 35.17% of the equity interest in UNISITS from Unisplendour for a cash price of RMB 44, 400,000 (approximately $6.53 million). UNISITS is a company organized under the laws of the People's Republic of China, engaging in the business of providing traffic engineering E&M systems, intelligent transportation products, and intelligent transportation services (ITS) to the domestic expressway, railway, and urban transportation markets.

Subsequently, on September 8, 2009, the Group Company entered into an option agreement with Mr. Xia, under which Mr. Xia granted to the Group Company a perpetual option to acquire all of Mr. Xia's equity interest in UNISITS for RMB 44.4 million, which is the exercise price. Concurrently, the Group Company acquired from Mr. Xia the rights to his share of all potential UNISITS dividends or other distributions. Mr. Xia pledged his equity interest in UNISITS to the Group Company for five years. The Group Company expects to exercise the option and take title to the equity interest now held by Mr. Xia upon the expiration of the five-year term of the pledge agreement when the option will first become exercisable. In September 2009, the Group Company and four of five board directors of UNISITS entered into an Acting in Concert agreement. The agreement allows the Group Company to govern the financial and operating policies of UNISITS and therefore to obtain the control of UNISITS. As a result, UNISITS became a variable interest entity of the Group Company and its financials has been included in the Company’s consolidated financial statements. As of September 30, 2009, 50% of the exercise price, or RMB 22, 200,000 has been paid to Unisplendour. The rest 50% of the exercise price will be paid within 45 days after the completion of registration of Mr. Xia as a shareholder of UNISITS with the relevant governmental authority in China.

The fair value of UNISITS at the acquisition date is allocated as follows:

                  Currency        
            In RMB     Exchange Rate     In USD  
  Net tangible assets       ¥  76,648,271     0.1467   $  11,244,302  
  Highway Monitoring and Control technology         1,650,000     0.1467     242,055  
  Contract backlogs         2,000,000     0.1467     293,400  
  Goodwill         45,941,729     0.1467     6,739,651  
  Total fair value at date of acquisition       ¥  126,240,000         $  18,519,408  
 

CTFO ownership

  35.17%   ¥  44,400,000     0.1467   $  6,513,480  
  Noncontrolling interest   64.83%     81,840,000     0.1467     12,005,928  
  Total   100.00%   ¥  126,240,000         $  18,519,408  

The following table summarizes what the results of operations of the Company would have been on a pro forma basis for the nine months ended September 30, 2009, if the acquisition had occurred prior to the beginning of the period. These results do not purport to represent what the results of operations for the Company would have actually been or to be indicative of the future results of operations of the Company.

      January 1 to     January 1 to     July 1 to     July 1 to  
      September 30, 2009     September 30, 2008     September 30, 2009     September 30, 2008  
  Revenue $ 56,019,065   $ 46,694,508   $  27,359,768   $ 18,249,756  
  Net Income $ 8,552,777   $ 7,575,375   $  4,292,238   $ 3,299,132  
 

EPS attributable to CTFO common shareholders:

                       
         Basic $  0.38   $  0.38   $  0.19   $  0.15  
         Diluted $  0.38   $  0.37   $  0.19   $  0.15  

17


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

9.

SHARE-BASED PAYMENTS

   

ASC 815-40 (formerly “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock,” or EITF 00-19), provides criteria for determining whether freestanding contracts that are settled in a company’s own stock, including common stock warrants, should be designated as either an equity instrument, an asset or as a liability under SFAS No. 133. Under the provisions of ASC 815-40 (formerly EITF 00-19), a contract designated as an asset or a liability must be carried at fair value on a company’s balance sheet, with any changes in fair value recorded in a company’s results of operations. It was determined that the Company's warrants qualify for accounting treatment under ASC 815-40 (formerly EITF 00-19), "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, A Company's Own Stock". Under the terms of the warrant agreements, if the Company fails to deliver the required number of Warrant Shares, the Company will be obligated to pay cash to settle the warrant claims. As a result, the Company must assume that it could be required to settle the warrants on a net-cash basis, thereby necessitating the treatment of the potential settlement obligation as a liability. The fair values of the warrants are presented on the accompanying consolidated balance sheet as “Accrued Warrant Liability” and the changes in the values of these warrants are shown in the accompanying consolidated statement of operations as “Decrease in fair value of warrants liability.” Such gains and losses are non-operating and have no effect on cash flows from operating activities.

   

(1) Warrants

   

The Company recognized the share-based compensation cost based on the grant-date fair value estimated in accordance with ASC 718 (formerly SFAS No. 123R).The Company issued warrants to Anteaus Capital, Inc., in aggregate, to purchase 277,778 shares of the Company’s common stock in connection with merger related services on May 14, 2007, with an exercise price of $1.80 per share. These warrants will expire on May 13, 2014 pursuant to the common stock purchase warrant agreement. The Company used the Black-Scholes option pricing model to determine the fair value of the stock warrants on May 14, 2007. On May 14, 2007, the fair value was $3.97 per share, resulting in a share-based compensation totaling $1,104,166. On November 29, 2007, the Company and Anteaus Capital, Inc. entered an amendment to the Company’s common stock purchase warrants. The amendment eliminated the clause subject to which if the Company fails to deliver the required number of Warrant Shares, the Company will be obligated to pay cash to settle the warrant claims. The 277,778 warrants issued to Antaeus Capital, Inc. have been re-valued at $1,039,807, and reclassified to Additional Paid-in Capital from Accrued Warrant Liability. Other income of $64,359 was recorded to account for the warrants at fair value.

   

The fair value for the share-based awards was estimated using the Black-Scholes option pricing model with the assumptions listed below:


      May 14, 2007     November 29, 2007  
  Expected volatility   203%     148%  
  Expected life (years)   7     6.46  
  Risk free interest rate   4.6%     3.72%  

On November 30, 2007, the Company issued warrants to CCG Investor Relations Partners LLC, in aggregate, to purchase 50,000 shares of the Company’s common stock in connection with investor relations services, with an exercise price of $5.00 per share. These warrants will expire on November 29, 2010 pursuant to the common stock purchase warrant agreement. The fair market value of these stock warrants was $200,105 and was estimated on the date of grant using the Black-Scholes option-pricing model in accordance with ASC 718 (formerly SFAS No. 123R) using the following weighted-average assumptions: expected dividend yield 0%; risk-free interest rate of 3.08%; volatility of 148% and an expected term of three years.

The expected volatilities are based on the historical volatility of the Company’s stock. The observations were made in a 52-week period. The expected terms of stock warrants are based on the remaining contractual life of stock warrants outstanding as these stock warrants vested immediately.

18


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

A summary of stock warrants for the nine months ended September 30, 2009 is as follows:

                    Weighted-Average  
                 Weighted-     Remaining  
              Average     Contractual Term  
                             Stock Warrants     Shares     Exercise Price     (Months)  
  Outstanding at January 1, 2009     327,778   $  2.29     70  
  Granted     -     -     -  
  Exercised or converted     209,723     1.80     -  
  Forfeited or expired     -     -     -  
  Outstanding at September 30, 2009     122,499   $  3.16     38  
  Exercisable at September 30, 2009     122,499   $  3.16     38  

(2) Stock Options

On January 7, 2008, the Company and Mr. Zhihai Mao, the Chief Financial Officer of the Company, entered into a stock option agreement. Pursuant to the terms of the stock option agreement, Mr. Mao was granted a non-qualified option on January 7, 2008 to purchase 200,000 shares of common stock of the Company at an exercise price of $6.70 per share, which was the closing price per share of the Company’s common stock as reported on the OTC Bulletin Board on such date. The option has a term of ten years and expires on January 7, 2018. The option vests in equal installments on a quarterly basis over a three-year period beginning on January 7, 2008.

On May 1, 2008, the Company entered into separate Stock Option Agreements with each of Mr. Jay Trien and Dr.Zhonsu Chen. Under the terms of the Stock Option Agreements, the Company agreed to grant a stock option to each of Mr. Trien and Dr. Chen for the purchase of 30,000 shares of common stock of the Company at an exercise price of $6.50 per share, which was the closing price per share of the Company’s common stock as reported on the OTC Bulletin Board on such date. The option has a term of five years and expires on May 1, 2013. The option vests in equal installments on a quarterly basis over a three-year period except for 2,500 options vested immediately on May 1 for Mr. Trien.

On September 28, 2008, the Company entered into a Stock Option Agreement with Mr. Ho-Ping Lin. Under the terms of the Stock Option Agreement, the Company agreed to grant a stock option to Mr. Lin for the purchase of 30,000 shares of common stock of the Company at an exercise price of $6.50 per share. The option has a term of five years and expires on September 28, 2013. The option vests in equal installments on a quarterly basis over a three-year period.

On April 29, 2009, the Board adopted the 2009 Equity Incentive Plan, which was subsequently approved by shareholders at the Company’s 2009 Annual Shareholder Meeting on May 29, 2009. On June 1, 2009, the Board granted an employee 30,000 stock options with an exercise price of $5.09, which was the closing price per share of the Company’s common stock as reported on the NASDAQ Stock Market on such date. The options have a term of five years and expire on June 1, 2014. The options vest in equal installments on a semi-annual basis over a three-year period. On the same date, the Board voted to adjust the exercise prices of the stock options which were granted on May 1, 2008 and September 28, 2008 to $5.09 per share and replaced the stock options granted on January 7, 2008 with 150,000 shares of restricted stocks. The incremental compensation cost of the re-priced options and replaced restricted stocks was $26,801, with totaling $8,189 recognized as compensation cost at the date of re-pricing.

The Company recorded compensation expense of $181,940 during the nine months ended September 30, 2009 in connection with the stock options and restricted shares.

19


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

The Company estimates the fair value of stock options using a Black-Scholes option pricing valuation model, consistent with the provisions of ASC 718 (formerly SFAS 123(R)) and SEC Staff Accounting Bulletin No. 107, or SAB 107. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of the Company’s stock, the risk-free rate and the Company’s dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by grantees, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company.

The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model. No dividends were assumed due to the nature of the Company’s current business strategy. The following table presents the assumptions used for options granted:

      Nine Months Ended     Year Ended  
      September 30, 2009     December 31, 2008  
  Risk free interest rate   1.65%     2.37-3%  
  Expected life (year)   3.5     3.5  
  Expected volatility   82%     30-53%  
  Weighted average fair value per option $ 2.91   $ 0.56-2.76  

No options were exercised during the nine months ended September 30, 2009.

As of September 30, 2009, total unrecognized compensation costs related to unvested stock options and restricted shares was $332,052. Unvested stock options are expected to be recognized over a weighted average period of 1.91 years.

A summary of options transactions during the nine months ended September 30, 2009 is as follows:

            Weighted  
      Number of     Average  
      Options     Exercise Price  
  Outstanding at January 1, 2009   290,000   $  6.6  
  Granted   30,000   $  5.09  
  Exercised   -   $  -  
  Cancelled   (200,000 ) $  6.7  
  Outstanding at September 30, 2009   120,000   $  6.6  
  Nonvested as of September 30, 2009   77,500   $  5.09  
  Option exercisable as of September 30, 2009:   42,500   $  5.09  

10.

EQUITY TRANSACTIONS

During the first quarter of 2009, the Company restructured investments in its Chinese VIE entities, resulting in a discrepancy of $126,078 in noncontrolling interest. The discrepancy is charged to Additional Paid-in Capital.

During the nine months ended September 30, 2009, warrants to purchase 209,723 shares of common stock were exercised in a cashless exercise, resulting in the issuance of 140,675 shares of common stock.

20


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

11.

INCOME TAXES

The Company adopted the provisions of ASC 740 (formerly FASB Interpretation No. 48), Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, the Company recognized no increases or decreases in the total amounts of previously unrecognized tax benefits. The Company had no unrecognized tax benefits as of September 30, 2009 and 2008. The Company did not incur any interest and penalties related to potential underpaid income tax expenses and also believed that the adoption of FIN 48 does not have a significant impact on the unrecognized tax benefits during the nine months ended September 30, 2009.

The Company, through its VIE and its VIE’s subsidiaries and affiliates, is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred net accumulated operating losses of $16,000,000 as of September 30, 2009 for income tax purposes. However, a hundred percent allowance has been created on the deferred tax asset of $5,000,000 due to uncertainty of its realization.

For the nine months ended September 30, 2009 and 2008, income tax expenses were as follows:

      Nine Months Ended September 30,  
     

2009 

    2008  
     

Domestic

    Foreign     Domestic     Foreign  
      Federal   State     China     Federal     State     China  
  Current                                     $ 109,946                                         $ -  
  Deferred             -                 49,971  
                                        $  109,946                                         $ 49,971  

The Group Company, Zhangcheng Media, Xinjiang Zhangcheng, and Dajian Zhitong are charged at the tax rate at 25% on the net income for PRC income tax purposes under the new Enterprise Tax Law in 2009. PKU, China TranWiseway, UNISITS, Beijing UNISITS, and Hangzhou UNISITS are charged at the tax rate at 15% on the net income for PRC income tax purposes in 2009. Beijing Tian Hao and Beijing Zhangcheng qualify as “new or high-technology enterprise” located in High-Tech Zones in Beijing, and are entitled to tax exemptions or preferential tax rates on the net income for PRC income tax purposes in 2009. Shanghai Yootu and Henan UNISITS are subject to a special rate at 2.5% of its taxable revenue in 2009.

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of its assets and liabilities. Deferred assets are reduced by a valuation allowance when deemed appropriate.

21



CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

The tax effects of existing temporary differences that give rise to significant portions of deferred tax assets at September 30, 2009 and December 31, 2008 were as follows:

    Deferred Tax Assets  
      Net operating loss     Valuation     Net deferred tax  
      carryforwards     allowance     assets  
  September 30, 2009:                  
   Foreign:                  
       In RMB ¥  1,828,361   ¥  -   ¥  1,828,361  
       Exchange rate   0.1467     0.1467        
       In USD $  268,221   $  -   $  268,221  
   Domestic :                  
       In USD $  5,000,000   $  (5,000,000 ) $  -  
                     
  December 31, 2008:                  
   Foreign:                  
       In RMB ¥  1,828,361   ¥  -   ¥  1,828,361  
       Exchange rate   0.1467     0.1467        
       In USD $  268,221   $  -   $  268,221  
   Domestic :                  
       In USD $  4,860,000   $  (4,860,000 ) $  -  

12.

INCOME PER SHARE

The Company calculates its basic and diluted earnings per share in accordance with ASC 260 (formerly SFAS No. 128, “Earnings Per Share”. Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options include nonvested stock granted to employees. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested stock options and unexercised warrants. In calculating the number of dilutive shares outstanding, the shares of common stock underlying unvested stock options are assumed to have been delivered on the grant date.

 

 

  Three Months Ended September 30,     Nine Months Ended September 30,  
 

 

           2009     2008              2009                2008  
 

Net income attributable to CTFO

$  3,975,277   $  3,097,541   $  8,223,606   $  6,970,602  
 

Basic earnings per share:

                       
 

Basic weighted average share outstanding

  22,333,000     21,325,245     22,245,288     20,175,820  
 

Basic earnings per common share

$  0.18   $  0.15   $  0.37   $  0.35  
 

Diluted earnings per share:

                       
 

Basic weighted average share outstanding

  22,333,000     21,325,245     22,245,288     20,175,820  
 

Effect of dilutive stock options and warrants

  246,496     197,186     240,636     217,351  
 

Diluted weighted average shares outstanding

  22,579,496     21,522,431     22,485,924     20,393,171  
 

Diluted earnings per common share

$  0.18   $  0.14   $  0.37   $  0.34  

22


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

13.

COMPENSATED ABSENCES

     

There was no vacation leave liability for the nine months ended September 30, 2009.

     
14.

RELATED-PARTY TRANSACTIONS

     

Due To Related Parties

     

As of September 30, 2009, Dajian Zhitong borrowed from two of its individual shareholders in the aggregated amount of RMB 504,065, or $73,946 for general working capital needs. The borrowings do not bear interest and are payable on demand.

     
15.

CONCENTRATION

     
a.

Cash

     

The Company maintains cash in US dollars in two commercial banks located in California. Up to $250,000 of the balance in each bank was insured by the U.S. Federal Deposit Insurance Corporation (FDIC). As of September 30, 2009 and December 31, 2008, uninsured balances totaled $2,026,044 and $1,422,809, respectively.

     
b.

Major Customers


      Revenue     Accounts Receivable  
      Nine Months Ended September 30,     At September 30,  
  2009:            
 

During the 3 months ended September 30, there were no customers that individually represent 10% or more of the Company's total revenue.

 
               
  2008:            
     Customer A $  1,472,523   $  269,623  
     Customer B   1,048,596     -  
     Customer C   1,044,226     -  
              Total $  3,565,345   $  269,623  

23


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

16. OTHER COMPREHENSIVE INCOME
   
 

Balances of related after-tax components comprising accumulated other comprehensive income, included in stockholders' equity, at September 30, 2009 were as follows:

   
      Foreign Currency     Accumulated Other  
      Translation Adjustment     Comprehensive Income  
  Balance at January 1, 2008 $  887,184   $  887,184  
  Change for the year ended December 31, 2008   1,612,709     1,612,709  
  Balance at January 1, 2009   2,499,893     2,499,893  
  Change for the nine months ended September 30, 2009   (388,589 )   (388,589 )
  Balance at September 30, 2009 $  2,111,304   $  2,111,304  

17.

SEGMENT INFORMATION

   

ASC 280 (formerly SFAS 131, “Disclosures about Segments of an Enterprise and Related Information”) requires companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures about products and services geographic and major customers. The Company has determined that it does not have any separately reportable operating segments.

   
18.

COMMITMENTS AND CONTINGENCIES

   

(1) Operating Leases

The Company and its subsidiaries rent offices under several operating leases. Rent expenses fosr these offices totaled $257,049 and $ $163,540 for the nine months ended September 30, 2009 and 2008, respectively. The aggregate future minimum payments under these lease agreements over one year are as follows:

  Year ending September 30,       Lease Commitments  
  2010     $ 1,421,706  
  2011       1,257,011  
  2012       1,092,612  
  Total     $ 3,771,329  

(2) Acquisition of Shanghai Yootu

On October 1, 2008, PKU, the Company’s indirectly-owned subsidiary, entered into equity transfer agreements with shareholders of Shanghai Yootu. Pursuant to the agreement, PKU acquired 100% ownership of Shanghai Yootu from six individual shareholders. Under the terms of the Equity Transfer Agreement, PKU will make the payments in three installments to the Transferors. The initial cash payment of RMB 8.8 million (approximately $1,300,000) was made in 2008. The second payment, consisting of 50% in cash and 50% in the Company’s common stock aggregately equal to twice Shanghai Yootu’s 2009 net income, will be made by the later of (1) January 1, 2010 or (2) the completion of the audit of financial statements of Shanghai Yootu for the year ended December 31, 2009. The final payment, consisting of 50% in cash and 50% in the Company’s common stock aggregately equal to three times Shanghai Yootu’s 2010 net income, will be made by the later of (1) January 1, 2011 or (2) the completion of the audit of financial statements of Shanghai Yootu for the year ended December 31, 2010.

24


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2009

19.

SUBSEQUENT EVENTS

  

We evaluated all subsequent events from the date of the balance sheet through November 11, 2009, which represent the issuance date of these financial statements. On November 3, 2009, the Company’s board of directors granted non-qualified options under the Company’s 2009 Equity Incentive Plan to the Company’s employees and consultants to purchase an aggregate 1,791,600 shares of common stock of the Company at an exercise price of $7.69 per share, which was the closing price per share of the Company's common stock as reported on the NASDAQ on such date. The options have a term of five years and expire on November 3, 2014. The options vest in equal installments on an annual basis over a four-year period beginning on November 3, 2009.

******

 

 

 

 

25


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that are based on the beliefs of our management, and involve risks and uncertainties, as well as assumptions, that, if they ever materialize or prove incorrect, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,” “aim,” “will” or similar expressions are intended to identify forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; and any statements of belief or intention. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include any of the factors and risks mentioned in the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2008 and subsequent SEC filings, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are based on information available to us on the date of this report. We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

Certain Terms

In this report, unless indicated otherwise, references to:

“China TransInfo,” “the Company,” “we,” “us,” or “our” refer to the combined business of all of the entities that form our consolidated business enterprise;

“China,” “Chinese” and “PRC” refer to the People’s Republic of China;

“BVI” refer to the British Virgin Islands;

“SEC” refer to the United States Securities and Exchange Commission; “Securities Act” refer to the Securities Act of 1933, as amended; “Exchange Act” refer to the Securities Exchange Act of 1934, as amended; “RMB” refer to Renminbi, the legal currency of China; and “U.S. dollar,” “$” and “US$” refer to the legal currency of the United States.

Overview of Our Business

We are a leading provider of public transportation information systems technology and comprehensive solutions in China. Our goal is to become the largest transportation information product and comprehensive solutions provider, as well as the largest integrated transportation information platform and commuter traffic platform builder and operator in China. Substantially all of our operations are conducted through our variable interest entities that are PRC domestic companies owned principally or completely by our PRC affiliates. Through our variable interest entities, we are involved in developing multiple applications in transportation, digital city, land and resource filling systems based on Geographic Information Systems, or GIS, technologies that are used to service the public sector.

26


Our focus is on providing transportation solutions. Our products and services include:

  • Transportation Planning Information System,
  • Pavement Maintenance System,
  • Electronic toll collection, or ETC,
  • Traffic Information Service System,
  • Taxi Security Monitoring, Commanding and Dispatching Platform,
  • GIS-T (Transportation) Middleware,
  • Traffic Flow Surveying Systems,
  • Intelligent Parking System,
  • Red Light Violation Snapshot System,
  • Intelligent Highway Vehicle Monitoring System,
  • Intelligent Public Transport System,
  • Palmcity Navigation Engine,
  • Comprehensive Location Based Service Platform,
  • Digital City, and
  • 2-D and 3-D GIS.

We also offer full range solutions for transportation oriented GIS, or GIS-T, covering transportation planning, design, construction, maintenance and operation .

Third Quarter Financial Performance Highlights

We continued to experience strong demand for our products and services during the third quarter of 2009, which resulted in continued growth in our revenues. Despite the overall economic slowdown in the global economy, the transportation information industry in China is in the process of rapid and continuous development with the continuous increase of Chinese government’s and public demand for advanced transportation information products and services to support more effective and efficient transportation networks in China. This trend is supported by the growing amount of governmental spending in the transportation sector. We believe this trend will continue to result in the growth in sales of our transportation products and services.

The following are some financial highlights for the third quarter of 2009:

  • Revenues: Our revenues were approximately $19.17 million for the third quarter of 2009, an increase of 115.02% from the same quarter of last year.
  • Gross Margin: Gross margin was 38.38% for the third quarter of 2009, as compared to 55.36% for the same period in 2008.
  • Operating Profit: Operating profit was approximately $4.26 million for the third quarter of 2009, an increase of 28.00% from $3.33 million of the same period last year.
  • Net Income: Net income was approximately $3.98 million for the third quarter of 2009, an increase of 28.34% from the same period of last year.
  • Fully diluted earnings per share were $0.18 for the third quarter of 2009.

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On September 8, 2009, our CEO and President, Mr. Shudong Xia, entered into an equity transfer agreement, or the Equity Transfer Agreement, with Unisplendour Corporation Limited, or Unisplendour, pursuant to which Mr. Xia acquired 35.17% of the equity interest, or the Equity Interest, in  Beijing UNISITS Technology Co. Ltd., or UNISITS for a cash price of RMB 44, 400,000 (approximately $6.53 million). Pursuant to the Equity Transfer Agreement, Mr. Xia paid 50% of the purchase price to Unisplendour within five (5) business days after the Equity Transfer Agreement became effective. The remaining 50% of the purchase price will be paid by Mr. Xia within forty-five (45) days after the completion of registration of Mr. Xia as a shareholder of UNISITS with the relevant governmental authority in China.

On September 8, 2009, Mr. Xia also entered into an option agreement, or the Option Agreement with our variable interest entity, China TransInfo Technology Group Co., Ltd, or the Group Company, pursuant to which, Mr. Xia granted to the Group Company a perpetual option to purchase all or a part of the Equity Interests at an exercise price of RMB 44,400,000. In exchange, the Group Company agreed to pre-pay to Mr. Xia the exercise price within 45 business days following the date of the Option Agreement. In addition, in order to ensure his fulfillment of the obligations under the Option Agreement, Mr. Xia agreed to pledge the Equity Interest to the Group Company for five years, or the Term of Pledge. The Group Company may exercise the option at any time commencing on the day following of the expiration of the Term of Pledge.

In September 2009, the Group Company and four of five board directors of UNISITS entered into an Acting in Concert agreement. The agreement allows the Group Company to govern the financial and operating policies of UNISITS and therefore to obtain the control of UNISITS. As a result, UNISITS became a variable interest entity of the Group Company and its financials have been included in the Company’s consolidated financial statements.

On November 3, 2009, the Company’s board of directors granted non-qualified options under the Company’s 2009 Equity Incentive Plan to the Company’s employees and consultants to purchase in aggregate 1,791,600 shares of common stock of the Company at an exercise price of $7.69 per share, which was the closing price per share of the Company's common stock as reported on the NASDAQ on such date. The options have a term of five years and expire on November 3, 2014. The options vest in equal installments on an annual basis over a four-year period beginning on November 3, 2009.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our revenue.

    Three Months Ended     Three Months Ended  
    September 30,     September 30,  
    2009     2008  
Revenues $  19,165,553     100.00%   $  8,913,514     100.00%  
Cost of revenues   11,809,948     61.62%     3,979,049     44.64%  
Gross profit            7,355,605     38.38%     4,934,465     55.36%  
Expenses:                        
     Selling, general, and administrative                        
     expenses   3,097,483     16.16%     1,607,712     18.04%  
Income from operations   4,258,122     22.22%     3,326,753     37.32%  
Other income (expense):                        
     Interest income   18,909     0.10%     23,575     0.26%  
     Interest expense   (42,038 )   -0.22%     (66,066 )   -0.74%  
     Subsidy income   188,829     0.99%     305,804     3.43%  
     Other income - net   52,433     0.27%     4,239     0.05%  
                       Total other income (expense)   218,133     1.14%     267,552     3.00%  
Net income before income taxes and minority interest   4,476,255     23.36%     3,594,305     40.32%  
Provision for income taxes   85,864     0.45%     109,864     1.23%  
Minority interest   415,114     2.17%     386,900     4.34%  
Net income $  3,975,277     20.74%   $  3,097,541     34.75%  

Revenues. Revenues increased approximately $10.26 million, or 115.02%, to approximately $19.17 million for the three months ended September 30, 2009, from approximately $8.91 million for the same period in 2008. This increase was mainly attributable to the increased sales of our products and the applications of our products in the Transportation sector during the third quarter of 2009 compared to the same period in 2008. We believe that such sales increased as a result of the growing recognition of our brand name and technology as well as the rapidly developing market opportunities in the transportation information sector in China.

The following table illustrates the revenues from the major Chinese government sectors and regulated industries in which we sell our products and services for the periods indicated. The table also provides the percentage of total revenues represented by each listed sector.

 

 

Three Months
Ended
September 30,
2009

 

 

Percentage
of Total
Revenues

 

 

Three Months
Ended
September 30,
2008

 

 

Percentage
of Total
Revenues

 

Transportation

$

17,385,968

 

 

90.71%

 

$

6,189,493

 

 

69.44%

 

Digital City

 

778,009

 

 

4.06%

 

 

2,407,733

 

 

27.01%

 

Land & Resources

 

984,527

 

 

5.14%

 

 

316,288

 

 

3.55%

 

Other

 

17,049

 

 

0.09%

 

 

0

 

 

0.00%

 

Total

$

19,165,553

 

 

100.00%

 

$

8,913,514

 

 

100.00%

 

As the table above indicates, the Transportation and Digital City sectors accounted for an aggregate of 94.77% and 96.45% of our sales for the three months ended September 30, 2009 and 2008, respectively. Sales in Land & Resources accounted for 5.14% and 3.55% of total sales over each of periods indicated above.

Cost of Goods Sold. Our cost of goods sold increased approximately $7.83 million, or 196.80%, to approximately $11.81 million for the three months ended September 30, 2009, from approximately $3.98 million during the same period in 2008. This increase was mainly due to the increase in hardware components and hardware equipment depreciation, which was generally in line with the increase in our sales. As a percentage of revenues, the cost of goods sold increased to 61.62% during the three moths ended September 30, 2009 from 44.64% in the same period in 2008.

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The following table illustrates in detail the items constituting our costs of goods sold.

Cost Item Three Months Ended September 30, 2009   Three Months Ended September 30, 2008  
Salary $  314,039   $  284,496  
Hardware   9,882,500     1,244,422  
Software licenses   831,133     433,588  
Outsourcing   37,976     1,675,001  
Other   744,300     341,542  
Total $  11,809,948   $  3,979,049  

Gross Profit. Our gross profit increased by approximately $2.43 million, or 49.07%, to approximately $7.36 million for the three months ended September 30, 2009 from approximately $4.93 million during the same period in 2008. Gross profit as a percentage of revenues was 38.38% for the three months ended September 30, 2009, a decrease of 16.98% from 55.36% during the same period in 2008. Such percentage decrease was mainly due to the inclusion of the financials of UNISITS whose sales generally involve more hardware components and have much lower margin than the Company’s legacy business during the three months ended September 30, 2009.

Selling and Marketing Expenses. Majority of our services and products are sold into the domestic Chinese market through contracts commissioned by the Chinese government. Various government entities and agencies either invite us to bid for a specific contract or award a contract to us on a non-bid basis. This type of procurement process normally accounts for more than 70% of our total sales. We are often invited to bid on contracts through our professional relationships and are awarded repeat business. Historically, we did not invest heavily in establishing a substantial marketing program. We promoted our products by developing relationships through Peking University, professional relationships with various agencies and municipalities within the Chinese government and in participation in industry trade exhibitions. Our marketing expenses therefore were relatively low in comparison to those of our competitors who do not have a record of performance and brand recognition or well-established government contacts. Starting from the first quarter of 2009, we also have enhanced our marketing efforts by organizing various industry trade exhibitions and conferences in efforts to further promote our corporate image and brand recognition within the transportation information industry in China.

Selling and marketing expenses, including sales representative commissions, promotion fees and marketing expenses increased approximately $0.45 million, or 422.04%, to approximately $0.56 million for the three months ended September 30, 2009 from approximately $0.11 million during the same period in 2008. As a percentage of revenues, selling expenses increased to 2.93% for the three months ended September 30, 2009 from 1.21% for the same period in 2008. Such dollar and percentage increase of selling and marketing expenses was mainly attributable to our expanded operations and sales volume as well as the enhanced marketing activities for the three months ended September 30, 2009.

General and Administrative Expenses. Our administrative expenses were approximately $2.54 million (13.23% of total sales) and approximately $1.50 million (16.83% of total sales) for the three months ended September 30, 2009 and 2008, respectively. The dollar increase was mainly due to the increased staffing and enhanced research and development efforts as well as more professional expenses associated with being a public company.

Income Taxes. China TransInfo Technology Corp. is subject to the United States federal income tax at a tax rate of 34%. No provision for income taxes in the United States has been made as China TransInfo Technology Corp. had no United States taxable income during the three months ended September 30, 2009.

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Our wholly owned subsidiary Cabowise was incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes. Our wholly owned subsidiary Intra-Asia Entertainment Corporation (Delaware) was incorporated in Delaware. No provision for state income taxes in Delaware has been made as Intra-Asia Entertainment Corporation (Delaware) had no Delaware taxable income during the three months ended September 30, 2009. Our wholly owned subsidiary Intra-Asia Entertainment (China) Limited (Hong Kong) was incorporated in Hong Kong and, under the current laws of Hong Kong, is not subject to income taxes. Our wholly owned subsidiary Intra-Asia Entertainment (Asia-Pacific) Limited (Samoa) was incorporated in Samoa and, under the current laws of Samoa, is not subject to income taxes.

China passed a new Enterprise Income Tax Law, or the New EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the New EIT Law and its implementation with respect to non-Chinese enterprises or group controlled offshore entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC shareholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

We may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that the Company is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules, dividends paid to us from our VIE Entities would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares. We are actively monitoring the possibility of “resident enterprise” treatment for the 2009 tax year and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.

If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be credited against our U.S. tax.

Our VIE Entities, the Group Company, Zhangcheng Media, Xinjiang Zhangcheng, and Dajian Zhitong are charged at the tax rate at 25% on the net income for PRC income tax purposes under the new Enterprise Tax Law in 2009. PKU, China TranWiseway, UNISITS, Beijing UNISITS, and Hangzhou UNISITS are charged at the tax rate at 15% on the net income for PRC income tax purposes in 2009. Beijing Tian Hao and Beijing Zhangcheng qualify as “new or high-technology enterprise” located in High-Tech Zones in Beijing, and are entitled to tax exemptions or preferential tax rates on the net income for PRC income tax purposes in 2009. Shanghai Yootu and Henan UNISITS are subject to a special rate at 2.5% of its taxable revenue in 2009. For the three months ended September 30, 2008, we incurred income tax expenses of $0.11 million while for the same period in 2009, we incurred income tax expenses of approximately $0.09 million.

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Net Income. Net income increased by approximately $0.88 million, or 28.34% to approximately $3.98 million for the three months ended September 30, 2009 from approximately $3.10 million for the same period of 2008, as a result of the factors described above.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our revenue.

    Nine Months Ended September 30,
2009
    Nine Months Ended September 30,
2008
 
         

Revenues

$  35,256,869     100.00%   $  18,685,813     100.00%  

Cost of revenues

  19,896,690     56.43%     8,258,137     44.19%  

Gross profit

  15,360,179     43.57%     10,427,676     55.81%  

Expenses:

                       
     Selling, general, and                        
     administrative expenses   6,797,818     19.28%     3,085,992     16.52%  

Income from operations

  8,562,361     24.29%     7,341,684     39.29%  

Other income (expense):

                       
     Interest income   51,392     0.15%     50,759     0.27%  
     Interest expense   (132,027 )   -0.37%     (75,983 )   -0.41%  
     Subsidy income   308,113     0.87%     305,804     1.64%  
     Other income(expense) - net   59,301     0.17%     -     -  
                       Total other income (expense)   286,779     0.81%     280,580     1.50%  

Net income before income taxes and minority interest

  8,849,140     25.10%     7,622,264     40.79%  
Provision for income taxes   109,946     0.31%     49,971     0.27%  
Minority interest   515,588     1.46%     601,691     3.22%  

Net income

$  8,223,606     23.32%   $  6,970,602     37.30%  

Revenues. Revenues increased approximately $16.57 million, or 88.68%, to approximately $35.26 million for the nine months ended September 30, 2009, from approximately $18.69 million for the same period in 2008. This increase was mainly attributable to the increased sales of our products and the applications of our products in the transportation sector during the nine months ended September 30, 2009 compared to the same period in 2008. We believe that such sales increased as a result of the growing recognition of our brand name and technology as well as the rapidly developing market opportunities in the transportation information sector in China.

32


The following table illustrates the revenues from the major Chinese government sectors and regulated industries in which we sell our products and services for the periods indicated. The table also provides the percentage of total revenues represented by each listed sector.

  Nine Months Ended
September 30, 2009
    Percentage of Total Revenues     Nine Months Ended
September 30, 2008
    Percentage of Total Revenues  

Transportation

$ 28,658,001     81.28%   $ 10,862,985     58.14%  

Digital City

  5,410,966     15.35%     6,023,139     32.23%  

Land & Resources

  1,092,385     3.10%     1,761,978     9.43%  

Other

  95,518     0.27%     37,711     0.20%  

Total

$ 35,256,869     100.00%   $ 18,685,813     100.00%  

As the table above indicates, the Transportation and Digital City sectors accounted for an aggregate of 96.63% and 90.37% of our sales for the nine months ended September 30, 2009 and 2008, respectively. Sales in Land & Resources accounted for 3.10% and 9.43% of total sales over each of periods indicated above.

Cost of Goods Sold. Our cost of goods sold increased approximately $11.64 million, or 140.93%, to approximately $19.90 million for the nine months ended September 30, 2009, from approximately $8.26 million during the same period in 2008. This increase was mainly due to the increase in hardware components and hardware equipment depreciation, which was generally in line with the increase in our sales. As a percentage of revenues, the cost of goods sold increased to 56.43% during the nine moths ended September 30, 2009 from 44.19% in the same period in 2008.

The following table illustrates in detail the items constituting our costs of goods sold.

Cost Item

  Nine Months Ended
September 30, 2009
    Nine Months Ended
September 30, 2008
 

Salary

$  819,633   $  878,303  

Hardware

  15,714,049     4,215,188  

Software licenses

  1,499,526     916,594  

Outsourcing

  368,363     1,785,988  

Other

  1,495,119     462,064  

Total

$  19,896,690   $  8,258,137  

Gross Profit. Our gross profit increased by approximately $4.93 million, or 47.30%, to approximately $15.36 million for the nine months ended September 30, 2009 from approximately $10.43 million during the same period in 2008. Gross profit as a percentage of revenues was 43.57% for the nine months ended September 30, 2009, a decrease of 12.24% from 55.81% during the same period in 2008. Such percentage decrease was mainly due t inclusion of the financials of UNISITS whose sales generally involve more hardware components and have much lower margin than the Company’s legacy business for the nine months ended September 30, 2009.

Selling and Marketing Expenses. Selling and marketing expenses, including sales representative commissions, promotion fees and marketing expenses increased approximately $0.69 million, or 128.80%, to approximately $1.23 million for the nine months ended September 30, 2009 from approximately $0.54 million during the same period in 2008. As a percentage of revenues, selling expenses increased to 3.49% for the nine months ended September 30, 2009 from 2.88% for the same period in 2008. Such dollar and percentage increase of selling and marketing expenses was mainly attributable to our expanded operations and sales volume as well as the enhanced marketing activities for the nine months ended September 30, 2009.

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General and Administrative Expenses. Our administrative expenses were approximately $5.57 million (15.79% of total sales) and approximately $2.55 million (13.64% of total sales) for the nine months ended September 30, 2009 and 2008, respectively. The dollar and percentage increase was mainly due to the increased staffing and enhanced research and development efforts as well as more professional expenses associated with being a public company.

Income Taxes. For the nine months ended September 30, 2008, we incurred an income tax expense of approximately $0.05 million while for the same period in 2009, we incurred an income tax expense of approximately $0.11 million. The increase in the income tax expense mainly resulted from the income tax paid or accrued with the increased taxable net incomes.

Net Income. Net income increased by approximately $1.25 million, or 17.98% to approximately $8.22 million for the nine months ended September 30, 2009 from approximately $6.97 million for the same period of 2008, as a result of the factors described above.

Liquidity and Capital Resources

General

As of September 30, 2009, we had cash and cash equivalents (excluding restricted cash) of approximately $21.13 million. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.

Cash Flow

    Nine Months Ended September 30,  

 

  2009     2008  

Net cash provided by (used in) operating activities

$ (2,371,396 ) $ 1,319,414  

Net cash provided by (used in) investing activities

$ 6,495,251   $ (5,374,595 )

Net cash provided by financing activities

$ 1,239,295   $ 16,006,533  

Net cash flow

$ 5,003,409   $ 12,246,696  

Operating Activities

Net cash used in operating activities was approximately $2.37 million for the nine month period ended September 30, 2009, while for the same period of 2008, we had approximately $1.32 million net cash provided by operating activities. The increase of the cash used in operating activities was mainly attributable to the increases in other receivables and cost and estimated earnings in excess of billings on uncompleted contracts for the nine months ended September 30, 2009 compared to the same period of 2008.

Investing Activities

Our primary uses of cash for investing activities are payments for the acquisition of business, property, plant and equipment.

Net cash provided by investing activities for the nine month period ended September 30, 2009 was approximately $6.50 million, which is an increase of approximately $11.87 million from net cash used in investing activities of approximately $5.37 million for the same period of 2008. The increase of the cash provided by investing activities was mainly due to the cash acquired from the acquisition of UNISITS.

34


Financing Activities

Net cash provided by financing activities for the nine month period ended September 30, 2009 was approximately $1.24 million, while for the same period of 2008 we had approximately $16.01 million net cash provided by financing activities. Such change was mainly attributable to the fact that we raised $15 million in the private placement transaction in July 2008

On June 17, 2008, we entered into a short-term loan agreement with Beijing Bank, Youyi Branch, or the Bank, pursuant to which the Bank has agreed to loan to us RMB 20,000,000 (approximately $2.93 million) for working capital purposes. The loan had an initial annual interest rate of 8.964%, which was floating based on interest rates determined by the People’s Bank of China from time to time. The interest is payable on a quarterly basis commencing September 20, 2008. The loan expired on June 17, 2009 and was renewed on June 22, 2009 with an initial interest rate of 5.31% per annum, which is also floating based on interest rates determined by the People’s Bank of China from time to time. Under the terms of the loan agreement, we are subject to customary affirmative and negative covenants. The loan may be accelerated and the Bank may demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain events of bankruptcy. As of the date of this report, a principal amount of approximately $2.93 million is outstanding. There are no financial covenants or ratios under this short-term loan agreement.

On September 29, 2009, our VIE entity, Beijing PKU Chinafront High Technology Co., Ltd., or PKU, entered into a short-term loan agreement with Huaxia Bank, Zhichunlu Branch, or the Huaxia Bank, pursuant to which the Huaxia Bank has agreed to loan to PKU RMB 30,000,000 (approximately $4.40 million) for working capital purposes. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the People’s Bank of China from time to time. The interest is payable on a monthly basis commencing October 20, 2009. The loan expires on September 29, 2010. As of the date of this report, a principal amount of approximately $4.40 million is outstanding. There are no financial covenants or ratios under this short-term loan agreement.

We believe that our currently available working capital, after receiving the aggregate proceeds of the bank loans referred to above, should be adequate to sustain our operations at our current levels through at least the next twelve months. However, depending on our future needs and changes and trends in the capital markets affecting our shares and the Company, we may determine to seek additional equity or debt financing in the private or public markets.

Obligations Under Material Contract

We have entered into a lease agreement to lease office spaces at 8th and 9th floors of Weishi Center, No. 39 Xueyuanlu, Haidian District, Beijing China. Pursuant to this lease, we have the right to use the office space of 5,311 square meters in the Weishi Center from November 1, 2009. We pay a monthly rent (including a monthly property management fee of RMB 258,460) of RMB 605,765 (approximately $88,800) for this facility. We are entitled for one free month rental of RMB 476,535 (approximately $69,855) per year. This lease expires on October 31, 2012. We intend to move our headquarter and other offices in Beijing to this location by the end of 2009. We expect that we will be able to renew the lease on similar terms prior to its expiration.

We have entered into a lease agreement with a Chinese individual, Zhao Li, from whom we have leased our current office space at 07 Floor E-Wing Center, No. 113 Zhichunlu, Haidian District, Beijing, China. Pursuant to this lease, we have the right to use the office space of 517 square meters in the E-Wing Center. We pay a monthly rent of RMB 50,000 (approximately $7,325) for this facility. This lease expires on December 31, 2010 and we intend to terminate it prematurely. On June 2, 2007, we entered into a real property purchase agreement with Zhao Li, pursuant to which Mr. Zhao agreed to sell the facility to us for a purchase price of RMB 9,747,000 (approximately $1,427,936). In September, 2009, the real property purchase agreement was verbally terminated by the parties and the prepaid amounts were returned to us in full.

We also entered into two additional lease agreements to lease office spaces at the 15th and the 16th floors of E-Wing Center, No. 113 Zhichunlu, Haidian District, Beijing, China. Under these two leases, we have the rights to use the office space of 378 square meters at the 15th floor and the office space of 609 square meters at the 16th floor in the E-Wing Center, respectively. We pay monthly rent of RMB 51,011 (approximately $7,473) and RMB 76,783 (approximately $11,249) under these two lease agreements, respectively. The leases expire on August 31, 2010 and March 30, 2011, respectively. We intend to terminate both leases prematurely.

35


Inflation

Our results of operations have not been affected by inflation and management does not expect that inflation risk would cause material impact on our operations in the future.

Seasonality

Our results of operations are affected by seasonality and we typically see lower sales during the first half than the second half of a year. Such seasonality is mainly caused by governmental seasonal budgeting activities and behaviors.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

Principles of Consolidation—The consolidated financial statements include the accounts of the Company, it's wholly owned subsidiaries Intra-Asia Entertainment (Asia Pacific) Limited, Intra-Asia Entertainment (China) Limited and Cabowise, its indirectly owned subsidiaries Oriental Intra-Asia, and the Company’s variable interest entities, or the VIE Entities, including the Group Company, PKU, Beijing Tian Hao , Beijing Zhangcheng, Xingjiang Zhangcheng, Zhangcheng Media, China TranWiseway, Dajian Zhitong, Shanghai Yootu, UNISITS, Hangzhou Ziguang Jietong Technology Co., Ltd., or Hangzhou UNISITS, Henan Ziguang Jietong Technology Co., Ltd., or Henan UNISITS, and Beijing Ziguang Jinzhidun Information Technology Co., Ltd., or Beijing UNISITS. All material intercompany accounts, transactions and profits have been eliminated in consolidation.

On February 3, 2009, the Company, through its indirect Chinese subsidiaries, Oriental Intra-Asia and PKU, entered into a series of equity transfer agreements with China TransInfo Technology Group Co., Ltd., or Group Company, a company incorporated under Chinese law, pursuant to which the Company transferred all of its indirect equity interests in PKU and PKU's subsidiaries to the Group Company. The main purpose of the restructuring is to allow the Company to engage in three new business segments, including online services, taxi advertising, and security and surveillance related business in China in which companies with foreign ownership, like the Company and its subsidiaries, are either prohibited or restricted from operating under the current applicable Chinese laws and regulations. Through the contractual or variable interest entity, or VIE, arrangements, the Company maintains substantial control over the VIE Entities' daily operations and financial affairs, election of their senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of the VIE Entities, the Company is entitled to consolidate the financial results of the VIE Entities in its own consolidated financial statements under FASB Interpretation No. 46R "Consolidation of Variable Interest Entities," or FIN 46R.

In September 2009, the Group Company and four of five board directors of UNISITS entered into an Acting in Concert agreement. The agreement allows the Group Company to govern the financial and operating policies of UNISITS and therefore to obtain the control of UNISITS. As a result, UNISITS became a variable interest entity of the Group Company and its financials has been included in the Company’s consolidated financial statements.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates include accrued warranty costs, as well as revenue and costs recorded under the percentage-of-completion method. Actual results could differ from those estimates.

Cash Equivalents—The Company classifies all highly liquid investments purchased with a maturity of three months or less as cash equivalents.

Accounts Receivable—Accounts receivable are carried at original invoice amount less an estimate for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.

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Allowance for doubtful accounts amounted to $32,395 and $32,439 at September 30, 2009 and December 31, 2008, respectively.

Long-Term Investment— The Company uses the cost method of accounting for investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20% and over which it does not have the ability to exercise significant influence. For entities in which the Company holds an interest of greater than 20% or in which the Company does have the ability to exercise significant influence, the Company uses the equity method.

Property and Equipment—Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is provided for using straight-line methods over the estimated useful lives of the respective assets, usually three to seven years.

Revenue Recognition—Most of the Company’s revenues are on contracts recognized using the percentage-of-completion method, measured by the ratio of costs incurred to date to estimated total costs for each contract. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as supplies and travels. General and administrative costs are charged to expense as incurred. Losses on contracts are recorded in full as they are identified.

For taxi media advertising revenue, the Company recognized deferred revenue when cash is received, but the revenue has not yet been earned. Taxi media advertising revenue is billed to the customer and recognized when the advertisement is published.

Research and Development—Research and development costs represent the costs of designing, developing and testing products and are expensed as selling, general and administrative expenses as incurred if not meeting capitalization requirements. Such costs of software projects that successfully passed technological feasibility tests are capitalized and amortized.

Share-Based Payments—The Company adopted Statement of Financial Accounting Standards No 123(R), “Share-Based Payments,” or SFAS No. 123R, effective January 1, 2006. SFAS No. 123R amends existing accounting pronouncements for share-based payment transactions in which an enterprise receives employee and certain non-employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No.123R generally requires such transactions be accounted for using a fair-value-based method.

Income Taxes—Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established against deferred tax assets if it is more likely than not that all, or some portion, of such assets will not be realized.

Effective January 1, 2007, we adopted Financial Accounting Standard Board (FASB) Interpretation No. 48 (FIN 48),

Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under FIN 48, tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts.

Impairment of Long-Lived Assets—The Company adopts SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded. Management has determined that no impairments of long-lived assets currently exist.

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Issuance of Shares by Subsidiaries—Sales of stock by a subsidiary is accounted for in accordance with Staff Accounting Bulletin Topic 5H, “Accounting for Sales of Stock by a Subsidiary.” The Company has adopted the capital transaction method to account for subsidiary stock sales. Accordingly, increases and decreases in the Company’s share of its subsidiary’s net equity resulting from subsidiary stock transactions are recorded on the Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Equity as increases or decreases to Additional paid-in capital.

Concentrations of Credit Risk—Financial instruments that subject the Company to credit risk consist primarily of accounts receivable, which are concentrated in a small number of customers in the Chinese governments. The Company performs ongoing credit evaluations of its customers. For the nine months ended September 30, 2009, the Company charged $0 to the bad debt expenses.

Statement of Cash Flows—In accordance with SFAS No. 95, "Statement of Cash Flows", 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.

Translation Adjustment—The Renminbi, or RMB,, the national currency of the PRC, is the primary currency of the economic environment in which the operations of China IRAE are conducted. The Company uses the United States dollar, or U.S. dollars, for financial reporting purposes.

In accordance with SFAS No. 52, “Foreign Currency Translation,” the Company’s results of operations and cash flows are translated at the average exchange rates during the period, assets and liabilities are translated at the exchange rates at the balance sheet dates, and equity is translated at the historical exchange rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

As of September 30, 2009 and December 31, 2008, the exchange rates between RMB(¥) and the USD were RMB¥1 = USD$0.1467 and RMB¥1 = USD$0.1467, respectively. The weighted-average rates of exchange between RMB and USD were RMB¥1 = USD$0.14659 and RMB¥1 = USD$0.14415, respectively. Total translation adjustment recognized as of September 30, 2009 and December 31, 2008 is $2,111,304 and $2,499,893, respectively.

Comprehensive Income—Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders’ equity.

Fair Value of Financial Instruments— The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments.

The carrying amounts of the Company's long-term debt approximate their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.

New Accounting Pronouncements

In June 2009, the FASB issued FAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162,” or “SFAS No. 168,”. The FASB Accounting Standards Codification, or Codification, will be the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in SFAS 168. All other accounting literature not included in the Codification is non-authoritative. The Codification is not expected to have a significant impact on our consolidated financial statements.

In December of 2008, the FASB issued FASB Staff Position 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” or FSP FAS 132(R)-1, which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or postretirement plan. FSP FAS 132(R)-1 is effective for fiscal years beginning after December 15, 2009. FSP FAS 132(R)-1 is not expected to have a material effect on our disclosures.

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Effective June 15, 2009, we adopted FASB Staff Position 107-1, APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments,” or FSP FAS 107-1, APB 28-1, which requires fair value disclosures in both interim as well as annual financial statements in order to provide more timely information about the effects of the current market conditions on financial instruments. The adoption of FSP FAS 107-1, APB 28-1 did not have a significant impact on our disclosures.

Effective June 15, 2009, we adopted Statement of Financial Accounting Standards No. 165, “Subsequent Events,” or SFAS No. 165, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Upon adoption, this standard did not have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS 141R, “Business Combinations - Revised 2007,” which replaces FASB Statement No. 141, “Business Combinations.” SFAS 141R establishes principles and requirements intending to improve the relevance, representational faithfulness, and comparability of information that a reporting entity provides in its financial reports about a business combination and its effects. This is accomplished through requiring the acquirer to recognize assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date, measured at their acquisition-date fair values. This includes contractual contingencies only if it is more likely than not that they meet the definition of an asset of a liability in FASB Concepts Statement No. 6, “Elements of Financial Statements - a replacement of FASB Concepts Statement No. 3. This statement also requires the acquirer to recognized goodwill as of the acquisition date, measured as a residual. However, this statement improves the way in which an acquirer’s obligations to make payments conditioned on the outcome of future events are recognized and measured, which in turn improves the measure of goodwill. This statement also defines a bargain purchases as a business combination in which the total acquisition-date fair value of the consideration transferred plus any noncontrolling interest in the acquiree, and it requires the acquirer to recognize that excess in earnings as a gain attributable to the acquirer. This therefore improves the representational faithfulness and completeness of the information provided about both the acquirer’s earnings during the period in which it makes a bargain purchase and the measures of the assets acquired in the bargain purchase. This Statement was adopted by us effective January 1, 2009, and the adoption of this Statement did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Stateme0147nts - an amendment of ARB No. 51, which establishes accounting and reporting standards to improve the relevance, comparability, and transparency of financial information in its consolidated financial statements. This is accomplished by requiring all entities, except not-for-profit organizations, that prepare consolidated financial statements to (a) clearly identify, label, and present ownership interests in subsidiaries held by parties other than the parent in the consolidated statement of financial position within equity, but separate from the parent’s equity, (b) clearly identify and present both the parent’s and the noncontrolling interest’s attributable consolidated net income on the face of the consolidated statement of income, (c) consistently account for changes in parent’s ownership interest while the parent retains it controlling financial interest in subsidiary and for all transactions that are economically similar to be accounted for similarly, (d) measure of any gain, loss or retained noncontrolling equity at fair value after a subsidiary is deconsolidated, and (e) provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This Statement also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. We adopted SFAS No. 160 effective January 1, 2009, and the adoption of this Statement did not have a material impact on our consolidated financial statements.

In April 2008, FASB issued FASB Staff Position (FSP) FAS 142-3, “Determination of the Useful Life of Intangible Assets,” to provide guidance for determining the useful life of recognized intangible assets and to improve consistency between the period of expected cash flows used to measure the fair value of a recognized intangible asset and the useful life of the intangible asset as determined under Statement 142. The FSP requires that an entity consider its own historical experience in renewing or extending similar arrangements. However, the entity must adjust that experience based on entity-specific factors under FASB Statement 142, Goodwill and Other Intangible Assets. The FSP was adopted by us effective January 1, 2009, and the adoption of the FSP did not have a material impact on our consolidated financial statements.

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In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Values When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This FSP provides guidance on (1) estimating the fair value of an asset or liability when the volume and level of activity for the asset or liability have significantly declined and (2) identifying transactions that are not orderly. The FSP also amends certain disclosure provisions of SFAS No. 157 to require, among other things, disclosures in interim periods of the inputs and valuation techniques used to measure fair value. For the Company, this FSP is effective prospectively beginning April 1, 2009, and the adoption of this FSP did not have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer, Mr. Shudong Xia and Mr. Zhihai Mao, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, Mr. Shudong Xia and Mr. Zhihai Mao concluded that as of September 30, 2009, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended. Notwithstanding the foregoing, our executive officers noted that information with respect to material agreements or amendments thereto was not identified on a timely basis so as to allow an evaluation as to whether a Current Report on Form 8-K was required to be filed with respect thereto. Accordingly, our chief executive officer and chief financial officer intend to obtain additional guidance and/or training with respect to the circumstances and events which require the filing of a Current Report on Form 8-K and intend to implement a new internal policy that will allow management to timely identify material agreements and amendments thereto that require the filing of a Current Report on Form 8-K as necessary.

Changes in Internal Control Over Financial Reporting.

During the fiscal quarter ended September 30, 2009, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are currently not aware of any legal proceedings or claims that would require disclosure under Item 103 of Regulation S-K. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any unregistered equity securities during the fiscal quarter ended September 30, 2009 that were not previously disclosed in a current report on Form 8-K that was filed during that period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

On September 29, 2009, our VIE entity, PKU, entered into a  Short-term Loan Agreement, with Huaxia Bank, pursuant to which Huaxia Bank has agreed to loan to PKU RMB 30,000,000 (approximately $4.40 million) for working capital purposes. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the People’s Bank of China from time to time. The interest is payable on a monthly basis commencing October 20, 2009. The loan expires on September 29, 2010. Under the terms of the loan agreement, PKU is subject to customary affirmative and negative covenants. The loan may be accelerated and Huaxia Bank may demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain events of bankruptcy. As of the date of this report, a principal amount of approximately $4.40 million is outstanding. There are no financial covenants or ratios under this short-term loan agreement.

On August 18, 2009, the Group Company entered into a lease agreement, or the Lease Agreement, with Beijing Weishi Hotel Management Co. Ltd., or Beijing Weishi, to lease office spaces at 8th and 9th floors of Weishi Center, No. 39 Xueyuanlu, Haidian District, Beijing China. Pursuant to the Lease Agreement, the Group Company has the right to use the office space of 5,311 square meters in the Weishi Center from November 1, 2009 to October 31, 2012. The Group Company pays a monthly rent (including a monthly property management fee of RMB 258,460) of RMB 605,765 (approximately $88,800) for this facility. Upon the entry into the Lease Agreement, the Group Company paid Beijing Weishi a refundable deposit in an amount of RMB 1,817,295 (approximately $267,250). The Group Company is entitled for one free month rental of RMB 476,535 (approximately $69,855) per year. This lease expires on October 31, 2012. We expect that we will be able to renew the lease on similar terms prior to its expiration.

In September 2009, the Group Company and four of five board members of UNISITS (including two directors who are also directors of the Company) entered into an Acting in Concert Agreement. Under the Acting in Concert Agreement, four directors of UNISITS agreed, during an initial term of four years, to act in concert with the Group Company in connection with the management, operations and appointment of directors and officers of UNISITS and therefore to obtain the control of UNISITS.

The foregoing description does not purport to be a complete statement of the parties’ rights and obligations under the agreements or the transactions contemplated thereby or a complete explanation of the materials thereof. The foregoing description is qualified in its entirety by reference to the English Translation of the Short-term Loan Agreement, the English Translation of Lease Agreement and the English Translation of Acting in Concert Agreement attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively.

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ITEM 6. EXHIBITS.
 
EXHIBITS.
   
10.1* English Translation of the Short-term Loan Agreement, by and between Beijing PKU Chinafront High Technology Co., Ltd. and Huaxia Bank, Zhichunlu Branch, dated September 29, 2009.
   
10.2* English Translation of Lease Agreement, by and between China TransInfo Technology Group Co., Ltd. and Beijing Weishi Hotel Management Co. Ltd., dated August 18, 2009.
   
10.3* English Translation of Acting in Concert Agreement, by and among China TransInfo Technology Group Co., Ltd. and four individual directors of Beijing UNISITS Technology Co. Ltd., dated September 2009.
   
31.1* Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2* Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1* Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2* Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
* Filed herewith.  

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATED: November 13, 2009

CHINA TRANSINFO TECHNOLOGY CORP.

By: /s/ Shudong Xia                                                  

Shudong Xia
Chief Executive Officer
(Principal Executive Officer)

By: /s/ Zhihai Mao                                                    

Zhihai Mao
Chief Financial Officer
(Principal Financial Officer)



 EXHIBIT INDEX
   
Exhibit  
Number Description
   
10.1* English Translation of the Short-term Loan Agreement, by and between Beijing PKU Chinafront High Technology Co., Ltd. and Huaxia Bank, Zhichunlu Branch, dated September 29, 2009.
   
10.2* English Translation of Lease Agreement, by and between China TransInfo Technology Group Co., Ltd. and Beijing Weishi Hotel Management Co. Ltd., dated August 18, 2009.
   
10.3* English Translation of Acting in Concert Agreement, by and among China TransInfo Technology Group Co., Ltd. and four individual directors of Beijing UNISITS Technology Co. Ltd., dated September 2009.
   
31.1* Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2* Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1* Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2* Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
* Filed herewith.