Tri-Tech Holding, Inc. - FORM 10-Q

Tri-Tech Holding, Inc. - FORM 10-Q - May 13, 2010

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Attached files

Tri-Tech Holding, Inc. Reports

file	filename
EX-32.2 - EXHIBIT 32.2 - Tri-Tech Holding, Inc.	dex322.htm
EX-31.2 - EXHIBIT 31.2 - Tri-Tech Holding, Inc.	dex312.htm
EX-32.1 - EXHIBIT 32.1 - Tri-Tech Holding, Inc.	dex321.htm
EX-31.1 - EXHIBIT 31.1 - Tri-Tech Holding, Inc.	dex311.htm

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the three month period ended March 31, 2010

¨	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 001-34427

Tri-Tech Holding Inc.

(Exact name of registrant as specified in its charter)

Cayman Islands

Not Applicable

(State or other jurisdiction of

incorporation or organization)

(I.R.S. employer

identification number)

5D Tower A, 2 Building Business Center Jinyuan Shidai,

No. 2 East Road Landianchang, Haidian District,

Beijing, People’s Republic of China 100097

(Address of principal executive offices and zip code)

(+86-10) 8887-6366

(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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes 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.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The Company is authorized to issue 30,000,000 ordinary shares, $0.001 par value per share. As of the date of this report, the Company has 7,791,833 issued and outstanding shares of common stock.

TRI-TECH HOLDING INC.

FORM 10-Q

INDEX


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		ii
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4/4T.	Controls and Procedures	23
PART II.	OTHER INFORMATION	24
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	(Removed and Reserved)	24
Item 5.	Other Information	24
Item 6.	Exhibits	25

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to the following:

•

the timing of the development of future products;

•

projections of revenue, earnings, capital structure and other financial items;

•

Statements of our plans and objectives;

•

Statements regarding the capabilities of our business operations;

•

Statements of expected future economic performance;

•

Statements regarding competition in our market; and

•

Assumptions underlying statements regarding us or our business.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update this forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

See the financial statements following the signature page of this report, which are incorporated herein by reference.

Item 2.

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

The following discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described herein.

Overview

We are a leading provider of integrated solutions in China for its water and environmental problems. We are headquartered in Beijing with a current headcount of 140 employees. Our clients are a combination of government agencies, municipalities, and industrial companies and are located throughout China. Since our inception in 2002, we have successfully implemented more than 260 projects in 29 provinces, municipalities and autonomous regions in China.

Through contractual arrangements with each of Beijing Yanyu Water Tech Co., Ltd. and Tranhold Environmental (Beijing) Co., Ltd., our two variable interest entities (“VIEs”) in China, we provide self-manufactured, proprietary or third-party products, system integration and other services in the fields of environmental protection, and water resource monitoring, development, utilization and protection. We design customized sewage treatment and odor control systems for China’s municipalities and larger cities. These systems combine process equipment, software, controls and instruments, information management systems, resource planning and local and distant networking hardware that includes sensors, control systems, programmable logic controllers, supervisory control and data acquisition systems (SCADA). We also design systems that track natural waterway levels for drought control, monitor groundwater quality and assist governmental agencies in managing water resources.

For the quarters ended March 31, 2010 and 2009, our total revenues amounted to approximately $4.2 million and $2.9 million, respectively, a 48.7% quarter-over-quarter increase. Our revenues are subject to VAT, business tax, urban maintenance and construction tax and additional education fees. We deduct these amounts from our gross revenues to arrive at our total revenues. Our net income for the quarters ended March 31, 2010 and 2009 was $0.8 million and $0.6 million, respectively, a quarter-over-quarter increase of 36.2%.

The Company experienced rapid growth in the sales of system integration, in the first quarter of 2010. Depending on the demand of customers and market conditions, we played different roles in the market, such as prime contractor, subcontractor, and hardware, software and service provider. However, with the further development of this market, we expect our sales price and profitability will change due to the intense competition in the sales of hardware and software products. In order to maintain the competition advantages, we will aggregate all our resources to expand our market share of prime contract and subcontract projects.

We generate revenues from services we provide in our three operating segments: (i) wastewater and tail gas treatment (ii) water resource management and (ii) industrial pollution control. Total sales and costs are divided between the three segments.

Wastewater and Tail Gas Treatment (“Segment 1”)

Revenues for this segment were $2.6 million in the quarter ended March 31, 2010, an increase of 65.8% over revenues of $1.5 million in this segment in the quarter ended March 31, 2009. Cost of revenue (exclusive of depreciation and amortization) was $1.5 million in the quarter ended March 31 2010, an increase of 79.1% over cost of revenue (exclusive of depreciation and amortization) of $0.9 million in the quarter ended March 31 2009. Operating expenses were $0.4 million in the quarter ended March 31 2010, an increase of 70.0% over operating expenses of $0.3 million in the quarter ended March 31, 2009. Net income attributable to Tri-Tech Holding Inc. (“TRIT”) was $0.6 million in the quarter ended March 31 2010, an increase of 52.4% over net income of $0.4 million in the quarter ended March 31 2009.

Water Resource Management (“Segment 2”)

Revenues for this segment were $1.6 million in the quarter ended March 31 2010, an increase of 23.8% over revenues of $1.3 million in this segment in the quarter ended March 31 2009. Cost of revenue (exclusive of depreciation and amortization) was $0.925 million in the quarter ended March 31, 2010, a decrease of 0.1% over cost of revenue (exclusive of depreciation and amortization) of $0.926 million in the quarter ended March 31, 2009. Operating expenses were $0.5 million in the quarter ended March 31, 2010, an increase of 217.7% over operating expenses of $0.2 million in the quarter ended March 31, 2009. Net income attributable to TRIT was $0.188 million in the quarter ended March 31, 2010, a decrease of 7.3% over net income of $0.203 million in the quarter ended March 31 2009.

Industrial Pollution Control (“Segment 3”)

This is a new segment for 2010. Revenues for this segment were $0.06 million in the quarter ended March 31, 2010. Cost of revenue (exclusive of depreciation and amortization) was $0.01 million, and net income was $0.02 million in the quarter ended March 31, 2010.

Factors Affecting Our Results of Operations – Generally

We believe the most significant factors that directly or indirectly affect our sales revenues and net incomes are:

•

The changes in China’s macro-economic environment, government strategies and policies, industrial development and planning;

•

The amount of the Chinese central and provincial governmental spending in water resources management, including surface and groundwater monitoring, flood control and mitigation, flood forecasting, water quality monitoring and assessment and water resources management decision maker systems;

•

The amount of Chinese central and local governmental investment in municipal wastewater management, including sewer pipelines and sewage treatment, water reuse and odor control;

•

Our comprehensive capabilities and competencies, including the evolving technologies and applications, industrial experience and customer basis, core competitive advantages, market shares and revenues; and

•

The availability and required terms of funding for our working capital.

Historically, our business growth has primarily been driven by an increase in the number of our customers and projects. The complexity and scale of our projects have grown from single pieces of equipment, to comprehensive systems, to general contracting for complete solutions. For example, we now undertake projects to design and build entire treatment plants and complicated flood monitoring and forecasting systems for river basins. Due to the increasing urbanization process and growing Chinese economy, we expect that we will continue to earn a substantial majority of our revenues from our existing product and service lines. As a result, we plan to continue to focus most of our resources on expanding our business to the larger areas in the PRC and increasing our market share in the regions we serve. In addition, we will allocate our resources to innovate our technology, to develop applications, to improve our larger project execution capabilities and profitability, and to market our brand to customers. Through a successful initial public offering on September 10, 2009, we received net proceeds of approximately $10.03 million and used a portion of the net proceeds for working capital, product research and development, application expansion and sales and marketing and expect to use the remaining portion for the same general purposes.

Macro-Economic Factors and Business Trends

The financial crisis started in the second half of 2008 and soon became a global economic crisis as financial markets around the world deteriorated. The crisis eventually spread to other sectors such as manufacturing.

China’s economy has improved markedly from the worst part of the financial crisis. According to China’s National Bureau of Statistics, China’s GDP for the quarter ended March 31, 2010 reached RMB 8.1 trillion (or $1.2 trillion), an increase of 11.9% over the same period in 2009. The overall fixed asset investment (“FAI”) in the quarter ended March 31, 2010 rose by 26.4%. In the same period, fixed asset investment in water resources, environment and public works management increased 24.5%.

According to the 2009 Chinese Government Annual Report announced by Primer Wen Jiabao, China’s expected GDP growth for 2010 is approximately 8% and the government intends to apply actively fiscal policies and appropriate expansionary monetary policies through a RMB 1.05 trillion increase in the government deficit and an RMB 7.5 trillion increase in bank loans. In addition, the Chinese government will continue to focus its efforts on environmental protection in 2010. To improve its environmental management, and municipal sewage and solid waste treatment in key areas, China will increase its daily sewage treatment capacity by 15 million cubic meters and its daily solid waste treatment capacity by 0.06 million tons. Based on an average construction unit cost of RMB 1300 per cubic meter of treatment capacity, we believe that total spending on sewage treatment will reach RMB 19.5 billion in 2010.

The Ministry of Environmental Protection of China stated that the Chinese government will invest RMB 3.1 trillion in the environmental protection sector during the 12^th 5-year plan (2011-2015), including RMB 1.0 trillion in construction of treatment facilities. Governmental spending will be twice as much as that during the 11^th 5-year plan (2006-2010). Total volume of environmental protection sector investment is expected to exceed RMB 1.1 trillion in 2010. Given the favorable policies, we believe that the environmental protection industry in China will maintain an annual growth rate between 15% and 20% for the next 5 years.

According to research done by the China Investment Advisory Co., the environmental protection industry in China will maintain an annual growth rate between 15% and 17% during the 11^th 5-year plan (2006-2010). The key investment fields include water environment, atmospheric environment, solid waste environment, nuclear safety and radiation environmental protection. In 2010, the total annual income from the environmental protection industry is expected to be from RMB 880 billion to RMB 1 trillion, in which the resource integration utilization output will be RMB 660 billion, the environmental equipment output will be RMB 120 billion and the environmental service output will be RMB 100 billion.

According to the National Development and Reform Commission, the exposure draft of the Energy Conservation and Environmental Protection Industry Development Plan has been submitted to the State Council for approval. The Plan is likely to be issued within the year by officers of the Shanghai Environmental Protection Bureau. It is reported that there will be 4 proposals in the Plan to promote energy conservation and environmental protection, including major-project-led strategies, taxation and financing policy system improvement, establishment of national projects research centers and labs in encouraging technology advances and implementation of new standards and policies to motivate new environmental protection sectors. Based on the market anticipation, China environmental protection industry output will exceed RMB 1 trillion ($150 billion) in 2010 and will account for 7% to 8% of GDP by 2015.

Based on the data shown above, we believe that our company is likely to continue to grow in 2010 because our business is poised to directly benefit from China’s investment in its water and environmental protection infrastructure.

New Opportunities in Water Resources and Wastewater Treatment

We are currently pursuing smaller river basin flood monitoring and forecasting systems, and groundwater monitoring systems in counties across the country. In the quarter ended March 31, 2010, we received the award of 2 projects for smaller river basin flood and forecasting systems in Zunyi and Anshun of Guizhou Province.

Through local distributors and partnerships, we also promote our proprietary products targeting the water monitoring and dispatching systems of the Northward Rerouting of Southern River engineering construction, which we believe has a projected budget and expense estimate of approximately $43.5 million. We are still pursuing these projects, but there can be no guarantee that we will be successful in all or any of these endeavors.

In 2010, we are closely tracking post-disaster reconstruction projects led by Sichuan Water Authority, Guangdong drought control projects, Henan drought control protects and Guangxi International River monitoring projects.

Our wastewater and tail gas treatment business segment focuses on Tianjin City and Hebei Province. In the quarter ended March 31, 2010, we won 2 contracts from this targeted municipal water and wastewater treatment market, including pump stations, treatment plants, odor control systems, and controls and instruments.

We are actively pursuing opportunities in the industrial wastewater and process tail gas treatment market in the petrochemical industry (such as the SINOPEC and PetroChina), the power generation industry, and the oil and gas industry. In the quarter ended March 31, 2010, we won 1 contract in Jinxi City of Liaoning Province.

Currently almost all newly designed sewage treatment plants have odorous gas containment and control requirements. As such, we expect an increase in sales of our proprietary biofiltration odor control systems.

To take advantage of these new market opportunities, we continue to increase our workforce to meet the anticipated increase in workload. In order to pursue several major new water projects and increase our interaction with our clients, we registered branch offices in Tianjin Dongli Economic Development Zone and Tianjin Baodi Economic Development Zone, and set up a branch office in Hebei Province in 2009.

Strategies for Growth

Wastewater and Tail Gas Treatment

In our municipal wastewater business, we plan to expand outside of our current base of operations. In our current business footprint, the local governments are building 80 new wastewater treatment plants. This growth represents development activities in only 2 provinces. We believe significant opportunities exist in the other 32 provinces, municipalities and autonomous regions in China.

We plan to continue to expand our company’s capabilities from sub-contracting to prime contracting services. Since our inception, we have gown our company from a provider of system controls to a company capable of managing the installation of municipal water and wastewater facilities. As we continue to grow, we intend to focus our business on the more complex installation projects.

Water Resources Management

In a similar manner, we are going to further develop our water resource management services from partial management solutions to full management of large scale river basin projects. We believe that the Chinese government’s decision to initiate new programs and allocate significant investment for their implementation will offer our company significant business opportunities. The severe drought in Southwest China will accelerate investment in water conservancy.

Industrial Pollution Control

We intend to strengthen our company’s industrial pollution services by penetrating adjacent industry verticals such as the power generation, oil and petrochemical industries. While we have previously implemented air pollution control systems for the petrochemical industry, we believe that there is significant opportunity to further develop this portion of our business.

Potential Acquisitions of Complementary Businesses

In addition to organic growth, we intend to target selected acquisitions to further enhance our growth. In general, our markets are highly fragmented with small competitors. We will consider acquiring companies that we believe will add significant value to our business. These potential targets may have strong customer relationships but limited market access. Similarly, these targets may possess specialized skills, but the businesses have not scaled to the point where they can fully implement such skills. When evaluating targets we use a disciplined, conservative approach to ensure the acquisitions are strategic and creative.

Results of Operations


	The quarter ended March 31, 2010 ($)		% of sales		The quarter ended March 31, 2009 ($)		% of sales		Change ($)		Change (%)
Revenue	$	4,238,114	100	%	$	2,850,807	100	%	$	1,387,307	48.7	%
Cost of Revenue (exclusive of depreciation and amortization)		2,471,238	58.3	%		1,781,723	62.5	%		689,515	38.7	%
Operating Expenses:
Depreciation and Amortization Expenses		40,442	1.0	%		21,583	0.8	%		18,859	87.4	%
Selling and Marketing Expenses		202,194	4.8	%		104,306	3.7	%		97,888	93.8	%
Other General and Administrative Expenses		696,508	16.4	%		279,049	9.8	%		417,459	149.6	%
Total Operating Expenses		939,144	22.2	%		404,938	14.2	%		534,206	131.9	%
Other Income (Expenses), net		60,180	1.4	%		45	0.0	%		60,135	134,504	%
Income before provision for income taxes and non-controlling interests income		887,912	21.0	%		664,190	23.3	%		223,722	33.7	%
Provision for Income Taxes		67,773	1.6	%		63,563	2.2	%		4,210	6.6	%
Net Income Attributable to Non-controlling Interests		2,525	0.1	%		375	0.0	%		2,150	573.3	%
Net Income Attributable to TRIT		817,614	19.3	%		600,252	21.1	%		217,362	36.2	%

Revenue

Our revenue was $4,238,114 in the quarter ended March 31, 2010, an increase of $1,387,307, or 48.7%, compared to revenue of $2,850,807 in the same period of 2009. The increased revenue was primarily driven by an increase in the number and size of our contractual engagements during this period. For example, in the first quarter of 2010, we obtained several contracts with a sales amount exceeding $1.1 million (equal to RMB 7.2 million). Additionally, the increase of revenue attributable to Segment 1, Segment 2 and Segment 3 was $1,016,069, or 73.2%, $310,595, or 22.4%, and $60,643, or 4.4%, respectively.

Our revenue primarily consists of system integration sales. In the quarter ended March 31 2010, system integration sales were $3,508,085, an increase of $2,188,482, or 165.8%, compared to system integration sales of $1,319,603 in the same period of 2009. Hardware sales were $347,081, a decrease of $750,074, or 68.4%, compared to hardware sales of $1,097,155 in the same period of 2009. Software sales were $382,948, a decrease of $51,101, or 11.8%, compared to software sales of $434,049 in the same period of 2009. Accordingly, in the quarter ended March 31, 2010, of total revenue, system integration sales, hardware sales and software sales were 82.8%, 8.2% and 9.0% respectively, compared to that of 46.3%, 38.5% and 15.2% respectively in the same period of 2009.

In response to the global financial crisis, China increased the government spending on the environmental protection sector, leading to the increase in the company’s projects in the wastewater treatment and water resource management and its related sales in system integration, hardware and software products. As a result, the government fiscal policies will have an effect on our business in one way or the other. In addition, we have been benefiting from the country’s urbanization progress.

Cost of Revenue (exclusive of depreciation and amortization)

Our cost of revenue (exclusive of depreciation and amortization) was $2,471,238 in the quarter ended March 31, 2010, an increase of $689,515, or 38.7%, compared to cost of revenue (exclusive of depreciation and amortization) of $1,781,724 in the quarter ended March 31, 2009. The increase in our cost of revenue (exclusive of depreciation and amortization) resulted directly from the increased number of projects during the period. The increase in the quarter ended March 31, 2010 cost of revenue (exclusive of depreciation and amortization) was less than the increase in overall revenue because, during the period: (i) we conducted more projects with higher gross margins; and (ii) we sourced more locally-made equipment at a lower cost in connection with our projects.

Of total revenue, cost of revenue (exclusive of depreciation and amortization) was 58.3% in the quarter ended March 31, 2010 and 62.5% in the same period of 2009. Although we did not experience a significant change in cost of revenue as a percentage of revenues, the large amount of Chinese government spending, urgent construction schedule, and strong market demand resulted in high prices for construction projects. As such, we experienced a business climate that permitted us to enjoy significant growth in revenue while limiting the cost of that revenue. We believe that this market situation will change if the Chinese government reduces the spending on the environmental sector or competition within this industry dramatically increases.

Operating Expenses

In the quarter ended March 31, 2010, our selling expenses were $202,194, an increase of $97,888 or 93.8%, compared to selling expenses of $104,306 in the same period of 2009. Salaries, travelling costs and entertainment expenses increased 147.1%, 3.0% and 104.6%, respectively. The increase in selling expenses attributable to Segment 1, Segment 2 and Segment 3 were $15,445, or 15.8%, $77,737, or 79.4% and $4,706, or 4.8%, respectively. The increased selling expenses primarily resulted from the: (i) increased number of our sales personnel, and (ii) more frequent and longer business travelling needed to acquire an increased number of contracts.

Our general and administrative expenses were $736,950 for the quarter ended March 31, 2010, an increase of $436,318, or 145.1%, compared to general and administrative expense of $300,632 in the quarter ended March 31, 2009. The increase reflected: (i) a $79,992 increase in salaries, (ii) a $45,329 increase in accounting and attorney services fee, (iii) a $24,894 increase in office rental expenses, (iv) a $18,859 increase in depreciation and amortization, (v) a $100,246 increase in the costs associated with stock options and warrants, and, (vi) a $166,998 increase in travelling, registration, printing and other expenses. The increased general and administrative expenses primarily resulted from the increase in: (i) the square footage of rental office, (ii) printing expenses, (iii) travelling, and (iv) professional service fees as a publicly traded company.

The Company’s operating expenses were $939,144 in the quarter ended March 31, 2010, an increase of $534,206, or 131.9%, compared to operating expenses of $404,938 in the same period of 2009. The increase in operating expenses mainly resulted from the rapid growth rate of general and administrative expenses and selling expenses.

Other Income (Expenses)

The Company’s other income was $60,180 in the quarter ended March 31, 2010, an increase of $60,135, or 134,504%, compared to other income of $45 in the same period of 2009. The increased other income in 2010 was mainly driven by a tax rebate.

Net Income

In the quarter ended March 31, 2010, our income before income taxes and non-controlling interest was $887,912, an increase of $223,722, or 33.7%, compared to income before income taxes and non-controlling interest of $ 664,190 in the same period of 2009. The increase resulted from both our increased revenue and gross margin improvement.

Our income taxes were $67,773 in the quarter ended March 31, 2010, an increase of $4,210, or 6.6%, compared to income taxes of $63,563 in the same period of 2009. The increase in income taxes for the quarter ended March 31, 2010 was primarily driven by an increase in net income for the quarter ended March 31, 2010.

Our net income attributable to non-controlling interest income was $2,525 in the quarter ended March 31, 2010, an increase of $2,150, or 573.5%, compared to non-controlling interest income of $375 in the same period of 2009.

In the quarter ended March 31, 2010, net income attributable to the shareholders of TRIT was $817,614, an increase of $217,362, or 36.2%, compared to net income attributable to the shareholders of TRIT of $600,252 in the same period of 2009.

Liquidity and Capital Resources

As highlighted in the consolidated statements of cash flows, the Company’s liquidity and available capital resources are impacted by four key components: (i) cash and cash equivalents, (ii) operating activities, (iii) financing activities, and (iv) investing activities.

Statement of Consolidated Cash Flows


	For the Quarter Ended March 31, 2010 ($)		For the Quarter Ended March 31, 2009 ($)		Change ($)
Net cash (used in) provided by operating activities	(583,819	)	802,539		(1,386,358	)
Net cash used in investing activities	(384,634	)	(214,534	)	(170,100	)
Net cash provided by financing activities	1,085,400		—		1,085,400
Effects of exchange rate changes on cash and cash equivalents	(86,175	)	(171,539	)	85,364
Increase (decrease) in cash and cash equivalents	30,772		416,466		(385,694	)
Cash and cash equivalents, beginning of period	7,171,464		732,418		6,439,046
Cash and cash equivalents, end of period	7,202,236		1,148,884		6,053,352

Cash and cash equivalents

As of March 31, 2010, our cash and cash equivalents were $7,202,236, including a U.S dollar deposit of $1,583,660 and an equivalent RMB deposit of $5,618,576.

Operating activities

Net cash used for operating activities was $583,819 in the quarter ended March 31, 2010, compared to $802,539 provided in the same period of 2009. A $1,386,358 decrease in cash from operating activities in the quarter ended March 31, 2010 was due to: (i) a $219,512 increase in net income before allocation to non-controlling interests, (ii) an increase in accounts receivable of $506,265 and a decrease in unbilled revenue of $1,772,606, (iii) a $1,504,580 decrease in prepayment of suppliers, (iv) a $231,591 increase in accounts payable, and (v) a $1,501,414 increase in restricted cash. As the billing cycle for our construction projects was relatively long, our accounts receivable used a great deal of our cash as a result of the rapid growth of our company. In addition, as we cannot issue invoices before the construction completion under our percentage-of-completion income recognition method, unbilled revenue utilized another part of our cash.

Financing activities

The cash provided by financing activities was $1,085,400 in the quarter ended March 31, 2010. This was due to $1,085,400 of cash received from the exercise of warrants into common stock.

Investing activities

Net cash used for investing activities was $384,634 in the quarter ended March 31, 2010, compared to $214,534 used in the same period of 2009. A $170,100 decrease in cash from investing activities in the quarter ended March 31, 2010 was due to the new equipment and vehicle purchases.

Effect of change in exchange rate changes on cash and cash equivalents

Net cash loss due to currency exchange was $86,175 in the quarter ended March 31, 2010, compared to a loss of $171,539 in the same period of 2009.

Working Capital and Cash Flow Management

As of March 31, 2010, our working capital was $18,685,115, including cash and cash equivalents of $7,202,236.

Due to the increase in purchase orders, our company has experienced some pressure from a shortage in working capital. We received net proceeds from our initial public offering of approximately $10.03 million in 2009, which we intend to use for working capital, product research and development, application expansion and sales and marketing.

However, we may require additional capital to undertake new and larger projects or complete strategic acquisitions in the future. In the event that our current capital is insufficient to fund these or other business purposes, we may take the following actions to meet such working capital needs:

•

We can improve our collection of accounts receivable. Most of our clients are central, provincial and local governments. Due to the current situation with the central government stimulus plan and increases in bank liquidity, we believe our clients are in good financial positions. Therefore, we expect to collect more cash from our relatively high accounts receivable, and use the cash collected in our business expansion;

•

We may raise additional capital from the market through an offering of equity or debt; or

•

We may incur short-and/or long-term debt through commercial loans. As of March 31, 2010, our company had long-term debt of $47,277 and short-term debt of $0. Therefore, we believe we are in a strong position to utilize debt, if appropriate.

Contractual Obligations and Commercial Commitments

Operating Leases

As of March 31, 2010, we had commitments under certain operating leases, requiring annual minimum rentals as follows:


2010	$	196,922
2011		134,177
2012		116,921
2013		116,921
2014		107,177
Total	$	672,118

Our leased properties are principally located in the PRC and are used for administration and research and development purposes. The terms of these operating leases vary from one to five years. Pursuant to the lease terms, when the contracts expire, we have the right to extend them with new negotiated prices. The leases are renewable subject to negotiation. Rental expenses were $69,227 and $44,333 for the quarters ended March 31, 2010 and March 31, 2009, respectively.

Product Warranties

Our warranty policy generally is to replace parts if they become defective within one year after deployment at no additional charge. Historically, failure of product parts due to materials or workmanship has not been significant. We have not incurred any material unexpected costs associated with servicing warranties. We continuously evaluate and estimate our potential warranty obligations, and record the related warranty obligation when the estimated amount becomes material at the time revenue is recorded.

Capital Expenditures

In the past, our capital expenditures were used to purchase computers and other office equipment for our business. Our capital expenditures may increase in the near term as our business continues to grow and as we expand and improve our financial and accounting systems and infrastructure. We spent $80,766 and $950 on such capital expenditures during the quarters ended March 31, 2010 and 2009, respectively. As of March 31, 2010, we do not have any capital expenditure commitments.

Seasonality

Our sales are not significantly affected by seasonality.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Taxation

Under the current law of the Cayman Islands, we are not subject to tax on income or capital gain. However, our revenues are primarily derived from payments made by Tranhold and Yanyu to our Chinese subsidiary, TTB. Prior to January 1, 2008, under PRC laws and regulations, a company established in China was typically subject to a state enterprise income tax rate of 30% and a local enterprise tax rate of 3% on its taxable income. PRC laws and regulations also provide foreign-invested enterprises established in certain areas in the PRC with preferential tax treatment. Since January 1, 2008, China has mandated a unified enterprise income tax rate of 25%, with a preferential tax rate of 15% for high-tech companies.

Pursuant to the New EIT Law and the supplementary regulations, only high-tech companies that have been re-certified as such under the new criteria are granted the preferential enterprise income tax rate of 15%. According to an approval from the Beijing State Tax Bureau of Xicheng District, TTB received a preferential income tax rate of 7.5% from January 1, 2009 to December 31, 2011.

Sales tax varies from 3% to 17% depending on the nature of the revenue. For revenues generated from those parts of our software solutions which are recognized by and registered with government authorities and meet government authorities’ requirements to be treated as software products, we are entitled to receive a refund of 14% on the total VAT paid at a rate of 17%. Revenues from software products other than the above are subject to full VAT at 17%. In addition, we are currently exempted from sales tax for revenues generated from development and transfer of tailor-made software solutions for clients; further, revenues from our consulting services are subject to a 5% sales tax. As a company that qualifies to issue VAT invoices, we need to maintain a certain amount of revenue that is taxable by VAT. As such, we may have to refuse some of the tax exemption benefit in our tailor-made software development business and pay VAT for those parts of the revenue in order to maintain minimum VAT revenue thresholds. This practice may cease to apply if more of our software products are matured, recognized and registered as software products in the PRC.

Segment Information

We have three reportable operating segments. The segments are grouped with references to the types of services provided and the types of clients that use those services. Total sales and costs are divided between the three segments. We assess each segment’s performance based on net revenues and gross profit on contribution margin. The three reportable operating segments are Segment 1: Water and wastewater treatment process control systems, process tail gas purification (“Wastewater and Tail Gas Treatment”), Segment 2: Water resources protection and allocation, flood control and forecasting, irrigation systems, and municipal water supply and distribution systems (“Water Resource Management”) and Segment 3: Provide systems for VOC abatement and odor control for petrochemical industry (“Industrial Pollution Control”).

Segment 1: Wastewater and Tail Gas Treatment


	The Quarter Ended March 31, 2010		The Quarter Ended March 31, 2009		Change ($)			Change (%)
Revenue	$	2,561,051	$	1,544,982	$	1,016,069		65.8	%
Cost of Revenue (exclusive of depreciation and amortization)		1,531,384		855,027		676,357		79.1	%
Selling Expenses		68,824		53,379		15,445		28.9	%
Depreciation and Amortization		21,480		8,325		13,155		158.0	%
Other General and Administrative Expenses		335,214		188,611		146,603		77.7	%
Operating Expenses		425,518		250,315		175,203		70.0	%
Other Income		2,194		161		2,033		1,262.7	%
Income before provision for income taxes and non-controlling interest		606,343		439,801		166,542		37.9	%
Income Taxes		342		42,089		(41,747	)	(99.2	)%
Net Income Attributable Non-controlling Interest		—		—		—
Net Income Attributable to TRIT	$	606,001		397,712		208,290		52.4	%

In Segment 1, revenue was $2,561,051 in the quarter ended March 31, 2010, an increase of $1,016,069, or 65.8%, compared to revenue of $1,544,982 in the same period of 2009. The primary contributor to this increase was our recently executed contracts for some individual projects with large transactional value through our customer base expansion and product line extension, such as a project contract in Tianjin Baodi ($1.06 million), and a project contract in Tianjin ($0.78 million). Recently, the Ministry of Environmental Protection of PRC with two other governmental agencies issued the First National Census of Pollution Source. This report acknowledged the severe environmental pollution in the PRC and unveiled the fact that Ministry of Environmental Protection, together with Ministry of Finance and State Administration of Taxation were discussing the environmental tax issue, which implied that the government will likely increase its environmental protection investment. We believe that such increased investment is likely to greatly benefit the Chinese environmental businesses, including our company.

Cost of revenue (exclusive of depreciation and amortization) for Segment 1 was $1,531,384 in the quarter ended March 31, 2010, an increase of $676,357, or 79.1%, compared to cost of revenue (exclusive of depreciation and amortization) of $855,027 in the same period of 2009. This increase was higher than our increase in Segment 1 revenue because the revenue generated from system integration increased while the revenue generated from software sales decreased.

In the quarter ended March 31, 2010, selling expenses were $68,824, an increase of $15,445, or 28.9%, compared to selling expenses of $53,379 in the same period of 2009. The increased selling expenses were mainly driven by the increased number of our sales personnel, as well as more frequent and longer business travel necessary to compete for larger contracts. However, in the future, we expect to increase our marketing to existing customers and our selling expenses may decrease as a result.

Depreciation and amortization was $21,480 in the quarter ended March 31, 2010, an increase of $13,155, or 158.0%, compared to depreciation and amortization of $8,325 in the quarter ended March 31, 2009. The increase in depreciation and amortization resulted from new equipment and vehicle purchases in 2010.

Other general and administrative expenses were $335,214, an increase of $146,603, or 77.7%, compared to other general and administrative expenses of $188,611 in the quarter ended March 31, 2009. Material causes for this increase included: (i) an increase in office rental expenses and (ii) an increase in the costs associated with being a publicly traded company, printing expenses, salary and depreciation and amortization expenses.

Operating expenses in the quarter ended March 31, 2010 were $425,518, an increase of $175,203, or 70.0%, compared to operating expenses of $250,315 in the quarter ended March 31, 2009. The primary reasons were: (i) an increase in expenses associated with being a publicly traded company, (ii) increased depreciation and amortization expenses, and (iii) an increase in selling expenses.

Other income (expenses) were $2,194 in the quarter ended March 31, 2010, a $2,033 increase compared to other income of $161 in the same period of 2009. The increase was mainly due to a tax rebate.

Income before provision for income taxes and non-controlling interest was $606,343 in the quarter ended March 31, 2010, an increase of $166,542, or 37.9%, compared to income before provision for income taxes and non-controlling interest of $439,801 in the same period of 2009.

Income taxes were $342 in the quarter ended March 31, 2010, a $41,747 decrease compared to income taxes of $42,089 in the same period of 2009.

Net income attributable to the shareholders of TRIT was $606,001 in the quarter ended March 31, 2010, an increase of $208,289, or 52.4%, compared to net income attributable to the shareholders of TRIT of $397,712 in the same period of 2009. The increased net income attributable to the shareholders of TRIT was mainly driven by the increase in revenue. In the future, we intend to continue to improve our profitability by expanding our existing market base and reducing project costs by utilizing locally-made equipment and parts.

Segment 2: Water Resource Management


	The Quarter Ended March 31, 2010		The Quarter Ended March 31, 2009			Change ($)			Change (%)
Revenue	$	1,616,420	$	1,305,825		$	310,595		23.8	%
Cost of Revenue (exclusive of depreciation and amortization)		925,391		926,697			(1,306	)	(0.1	)%
Selling Expenses		128,664		50,927			77,737		152.6	%
Depreciation and Amortization		17,481		13,258			4,223		31.9	%
Other General and Administrative Expenses		345,149		90,438			254,711		281.6	%
Operating Expenses		491,295		154,623			336,672		217.7	%
Other Income		57,986		(116	)		58,102		(50,088	)%
Income before provision for income taxes and non-controlling interest		257,721		224,389			33,332		14.9	%
Income Taxes		67,432		21,474			45,958		214.0	%
Net income attributable to Non-controlling Interest		2,525		375			2,150		573.2	%
TRIT Net Income Attributable to TRIT	$	187,764	$	202,540			(14,776	)	(7.3	)%

In Segment 2, revenue was $1,616,420 in the quarter ended March 31, 2010, an increase of $310,595 or 23.8%, compared to revenue of $1,305,825 in the same period of 2009. This increase was driven by the increase in the number of water resource management projects and the size of each project, which resulted from the increase in government spending on water conservancy facilities.

Cost of revenue (exclusive of depreciation and amortization) in Segment 2 was $925,391 in the quarter ended March 31, 2010, a decrease of $1,306, or 0.1%, compared to cost of revenue (exclusive of depreciation and amortization) of $926,697 in the same period of 2009. This increase was less than our increase in revenue because: (i) we conducted more projects with higher gross margins; and (ii) we lowered our equipment cost by acquiring more locally-made equipment and parts.

Selling expenses were $128,664 in the quarter ended March 31, 2010, an increase of $77,737 or 152.6%, compared to selling expenses of $50,927 in the same period of 2009. The growth rate of selling expenses was higher than the growth rate of revenue. The increased selling expenses in 2010 included: (i) an increase in travelling cost, and (ii) an increase in salaries. We expect to secure additional contracts and projects through the increase in our selling expenses, such as rewarding outstanding sales representatives, increasing the number of sales personnel as well as the frequency and time of business travel.

Depreciation and amortization in Segment 2 was $17,481 in the quarter ended March 31, 2010, compared to depreciation and amortization of $13,258 in the same period of 2009. The increase in depreciation and amortization resulted from new equipment and vehicle purchases in 2010.

Other general and administrative expenses were $345,149 in the quarter ended March 31, 2010; an increase of $254,711, or 281.6%, compared to other general and administrative expenses of $90,438 in the quarter ended March 31, 2009. The increase in total general and administrative expenses was primarily due to: (i) an increase in expenses associated with being a publicly traded company, and (ii) increased depreciation and amortization expenses.

Operating expenses in the quarter ended March 31, 2010 were $491,295, an increase of $336,672, or 217.7%, compared to operating expenses of $154,623 in the same period of 2009. This increase directly resulted from our increased revenues. To the extent our company continues to increase the number of its projects, we will add administrative personnel as needed.

Other income was $57,986 in the quarter ended March 31, 2010; an increase of $58,102, compared to other loss of $116 in the quarter ended March 31, 2009. The increase was primarily due to the increased tax rebate in software sales.

Income before provision for income taxes and non-controlling interest was $257,721 in the quarter ended March 31, 2010, an increase of $33,332, or 14.9%, compared to income before provision for income taxes and non-controlling interest of $224,389 in the same period of 2009. The increase was driven by the rapid growth of our revenue.

Income taxes were $67,432 in the quarter ended March 31, 2010, an increase of $45,958, or 214.0%, compared to income taxes of $21,474 in the same period of 2009. This increase is in conformity with our increased revenues.

Net income attributable to non-controlling interest was $2,525 in the quarter ended March 31, 2010, an increase of $2,150, or 573.3%, compared to non-controlling interest of $375 in the same period of 2009.

Net income attributable to the shareholders of TRIT was $187,764 in the quarter ended March 31, 2010, a decrease of $14,776, or 7.3%, compared to net income attributable to the shareholders of TRIT of $202,540 in the same period of 2009. The decreased net income attributable to the shareholders of TRIT was mainly driven by the increase in revenue, the increase in operating expenses and the increase in income taxes.

Segment 3: Industrial Pollution Control


	The Quarter Ended March 31, 2010		The Quarter Ended March 31, 2009		Change ($)		Change (%)
Revenue	$	60,643	$	—	$	60,643	—
Cost of Revenue (exclusive of depreciation and amortization)		14,463		—		14,463	—
Selling Expenses		4,706		—		4,706	—
Depreciation and Amortization		1,481		—		1,481	—
Other General and Administrative Expenses		16,144		—		16,144	—
Operating Expenses		22,331		—		22,331	—
Other Income				—			—
Income before provision for income taxes and non-controlling interest		23,849		—		23,849	—
Income Taxes				—			—
Net Income attributable to Non-controlling Interest				—			—
TRIT Net Income Attributable to TRIT	$	23,849	$	—		23,849	—

In line with our development strategies, we have expanded our business to include industrial pollution control. We began operating in this segment for the first time in the quarterly period ended March 31, 2010. In the first quarter of 2010, we secured an industrial pollution control project from Jinxi Prochemical Co. a subsidiary of Petro China. We intend to increase our efforts to develop business in this field and secure more contracts.

Significant Accounting Policies

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The accompanying consolidated financial statements include the accounts of our company, subsidiaries and VIEs. All material inter-company transactions and balances have been eliminated in the consolidation.

Our company adopted the provisions of FIN 46(R) (ASC No. 810). Pursuant to FIN 46(R), Tranhold and Yanyu are VIEs of our company, and we are the primary beneficiary of the VIEs. Accordingly, the VIEs have been consolidated in our financial statements.

We compile our daily accounts in accordance with generally accepted accounting principles in the PRC (“PRC GAAP”) and convert our financial statements to make them comply with U.S. GAAP when reporting.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from these estimates.

Certain of our accounting policies require higher degrees of judgment than others in their application. These include the recognition of revenue and earnings from system integration under the percentage of completion method and the allowance for doubtful accounts. Management evaluates all of its estimates and judgments on an on-going basis.

Revenue Recognition

Revenues consist primarily of product sales, software sales, and products and services solutions. Our company recognizes revenue when it is probable that the economic benefits will flow to the Company.

Specifically we provide products and service solutions under short and long-term fixed-price contracts. The contract periods range from two months to approximately three years in length. Our company recognizes income for these contracts following the percentage-of-completion method, measured by contract milestones in accordance with the AICPA’s Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”) (ASC No. 605). Cost of revenue (exclusive of depreciation and amortization) is based on total actual costs incurred plus estimated costs to completion applied to percentage of completion as measured by contract milestone. Cost of revenues (exclusive of depreciation and amortization) includes direct labor, materials and the applicable share of overhead expense directly related to the execution of services and delivery of projects.

If unapproved change orders and claims occur in the future, in accounting for contracts, we will follow Paragraphs 62 and 65 of SOP 81-1 (ASC No. 605). We will recognize as revenues costs associated with unapproved change orders (Paragraph 62 of SOP 81-1) and claims (Paragraph 65 of SOP 81-1) to the extent it is probable that such claims and change orders will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated. Contract losses are provided for in their entirety in the period that they become known, without regard to the percentage-of-completion. However, we have not experienced significant unapproved change orders to date.

Our company recognizes sales of its products upon delivery of goods and passage of title in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, as amended by SAB No. 104, “Revenue Recognition.”

We recognize revenue from the sales of software, support contracts and services in accordance with SOP No. 97-2 (ASC No. 985), “Software Revenue Recognition” and SOP 81-1 (ASC No. 605). For software sales with no significant post-shipment obligations and no uncertainty about customer acceptance, our company recognizes revenue on delivery of software to the customer. Our company recognizes revenues for software sales with significant post-shipment obligations, including the production, modification, or customization of software, by the percentage-of-completion method, with progress to completion measured on the basis of milestone completion, labor costs incurred currently versus the total estimated labor cost of performing the contract over its term, or other factors appropriate to the individual contract of sale.

No post-contract support (“PCS”) arrangement is included in the software sales.

We present all sales revenue net of VAT or a sales tax. Our company’s products that are sold in the PRC are generally subject to a Chinese VAT at a rate of 17% or sales tax of 5% of the gross sales price, except for certain proprietary software sales, which will only be subject to an effective tax rate of 3%. The VAT may be offset by VAT paid by our company on purchased raw materials and other materials included in the cost of projects or producing the finished product.

Our company records revenue in excess of billings as “unbilled receivables.” We record billings in excess of revenues as “billings in excess of revenue.”

Consolidation of Variable Interest Entities

The accounts of Yanyu and Tranhold are consolidated in the accompanying financial statements pursuant to FIN 46(R). As VIEs, Yanyu’s and Tranhold’s sales are included in our company’s total sales, their income from operations is consolidated with our company’s, and our net income from continuing operations before non-controlling interest in income includes all of Yanyu’s and Tranhold’s net income. Our non-controlling interest in their income is then subtracted in calculating the net income attributable to our company. Because of the contractual arrangements, we have a pecuniary interest in each of Yanyu and Tranhold that requires consolidation of our company’s, Yanyu’s and Tranhold’s financial statements.

Accounts Receivable

We recognize accounts receivable initially at fair value less an allowance for doubtful accounts. We make an allowance for doubtful accounts based on aging of accounts receivable and on any specifically identified accounts receivable that may become uncollectible. We maintain allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments in the relevant time period. We review the accounts receivable on a periodic basis and make general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, we consider many factors, including the age of the balance, the customer’s historical payment history and current credit-worthiness and current economic trends. The amount of the provision, if any, is recognized in the consolidated statement of operations within “General and administrative expenses.”

Cost of Revenues (exclusive of depreciation and amortization)

Cost of revenues (exclusive of depreciation and amortization) include: material and equipment costs, transportation costs, labor costs, processing costs, packaging costs, quality inspection cost, quality control costs, and sales tax. Cost of revenues (exclusive of depreciation and amortization) also includes inbound freight charges, purchasing and receiving costs and inspection costs, where those types of cost occur.

Operating expenses

Operating expenses include: salaries, bonus, and social insurance of management, administrative and sales personnel, traveling costs, entertainment expenses, depreciation of equipment, amortization of intangible assets, office rental expenses, professional service fee, office supply, R&D expenses, bad debt provision, etc.

Plant and Equipment

We state plant and equipment at historical cost less accumulated depreciation and amortization. Historical cost consists of purchase price and any directly attributable costs of bringing the assets to working condition and location for intended use. We provide for depreciation and amortization in amounts sufficient to expense the related cost of depreciable assets for operations over their estimated useful lives. We compute depreciation using the straight-line method over the estimated useful lives of the assets with 5% residual value.

Estimated useful lives of the Company’s assets are as follows:


		Useful Life
Buildings and improvements		40 years
Transportation equipment		5-8 years
Machinery		10 years
Office equipment		5 years
Furniture		5 years

We eliminate the cost and related accumulated depreciation of assets sold or otherwise retired from the accounts and include any gain or loss in the statement of income. We charge maintenance, repairs and minor renewals directly to expenses as incurred, and capitalize major additions and betterment to buildings and equipment.

The depreciation expense for the quarterly periods ended March 31, 2010 and 2009 amounted to $22,704 and $9,119, respectively, and the net value of plant and equipment as of March 31, 2010 and December 31, 2009 amounted to $432,226 and $374,009 respectively.

Intangible Assets

We amortize other acquired intangible assets with definite lives on a straight-line basis over their expected useful economic lives. We do not amortize intangible assets with an indefinite useful life, and we subject such assets to an impairment test annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. We periodically evaluate the recoverability of all intangible assets and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.


		Useful Life
Proprietary technology relating to sewage, municipal solid waste treatment and tail gas purification		20 years
Proprietary technology relating to low energy consumption data transmission system		20 years
Large region environmental management system		10 years
Mobile web management system		10 years
Database management system		10 years
Pollution reduction checking assistant		10 years
Water pollution control infrastructure		10 years

The amortization expense for the quarterly periods ended March 31, 2010 and 2009 amounted to $17,738 and $12,464, respectively. The net value of intangible assets as of March 31, 2010 and 2009 amounted to $1,073,497 and $797,854, respectively.

Inventories

We value inventory at the lower of cost or net realizable value and determine inventory by using the average cost method. Inventory consists of raw materials, finished goods, and work-in-progress, which includes the cost of direct labor, materials and overhead costs related to projects.

Inventories consisted of the following:


	March 31, 2010 (Unaudited)		December 31, 2009		March 31, 2009 (Unaudited)
Raw materials	$	139,834	$	140,048	$	112,474
Finished goods		759,469		360,152		464,418

Project work-in-progress		1,090,333		1,073,124		1,257,605
Totals	$	1,989,636	$	1,573,324	$	1,834,497

We review our inventory periodically for possible obsolete goods and to determine if any reserves are necessary for potential obsolescence. As of March 31, 2010 and 2009, we determined that no more reserves were necessary.

Research and development

Research and development expenses include salaries, consultant fees, supplies and materials, as well as costs related to other overhead such as depreciation, facilities, utilities and other departmental expenses. Our company expenses costs for the development of new software products and substantial enhancements to existing software products as incurred until technological feasibility has been established, at which time we capitalize any additional costs. Our management is responsible for assessing the establishment of technological feasibility in accordance with FAS 86 (ASC No. 985), “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.”

Research and development costs recorded in selling and general and administrative expenses were $39,338 and $53,712 during the quarters ended March 31, 2010 and 2009, respectively. No research and development expenses were capitalized in the quarters ended March 31, 2010 and 2009, respectively. The decrease in research and development costs is temporary. As we implement our strategy increasing research and development spending to develop new products in the future, the costs of research and development will increase accordingly. We did not capitalize research and development expenses in the quarters ended March 31, 2010 and 2009, respectively.

Translation of Foreign Currency

We use the United States dollar as our reporting and functional currency. We translate monetary assets and liabilities denominated in currencies other than United States dollars into United States dollars at the rates of exchange ruling at the balance sheet date. We convert transactions in currencies other than United States dollars during the year into United States dollars at the rates of exchange ruling at the transaction dates.

We maintain financial records of our PRC subsidiary and the VIEs in RMB, their functional currency and the currency of the PRC. We translate their balance sheets assets and liabilities into United States dollars based on the rates of exchange existing on the balance sheet date and translate their statements of operations using a weighted average rate for the period. We reflect translation adjustments as accumulated other comprehensive income (loss) in stockholders’ equity.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments amounted to $374,567 and $377,097 as of March 31, 2010 and December 31, 2009, respectively. The Company translated balance sheet amounts with the exception of equity at March 31, 2009 at RMB 6.8263 to US$ 1.00 as compared to RMB 6.8282 to US$ 1.00 at December 31, 2009. The Company stated equity accounts at their historical rate. The average translation rates applied to income statement accounts for the quarters ended March 31, 2010 and March 31, 2009 were RMB 6.8269 and RMB 6.8357, respectively.

Earnings per share

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of ordinary shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contract, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. We exclude potential ordinary shares in the diluted EPS computation in periods of losses from continuing operations, as their effect would be anti-dilutive.

We have granted 525,500 options to our key employees and 177,500 warrants, to purchase ordinary shares, both of which are included when calculating the diluted earnings per share. As of March 31, 2010, 134,000 warrants had been exercised at a price equal to $8.10 per share.

PRC Enterprise Income Tax

Our company provides for deferred income taxes using the asset and liability method. Under this method, we recognize deferred income taxes for tax credits and net operating losses available for carry-forwards and significant temporary differences. We classify deferred tax assets and liabilities as current or non-current based upon the classification of the related asset or liability in the financial statements or the expected timing of their reversal if they do not relate to a specific asset or liability. We provide a valuation allowance to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of, the deferred tax assets will not be realized.

We adopted FASB Interpretation 48 (ASC No. 605), “Accounting for Uncertainty in Income Taxes” (“FIN 48”), as of January 1, 2007. We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is over 50% likely to be realized on examination. For tax positions not meeting the “more likely than not” test, we do not record a tax benefit. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The adoption had no effect on our financial statements. We did not have any significant unrecognized uncertain tax positions.

Our operations are subject to income and transaction taxes mainly in the PRC. Significant estimates and judgments are required in determining our provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result. We do not anticipate any events that are likely to change these uncertainties.

PRC Value-added Tax

Our Company’s products that are sold in the PRC are generally subject to a Chinese VAT at a rate of 17% except for certain proprietary software sales, which will only be subject to a tax at an effective rate of 3%. The VAT may be offset by VAT we pay on raw materials and other materials included in the cost of producing their finished product. Accrued VAT payables from Yanyu and Tranhold are subject to a 10% surtax, which includes urban maintenance and construction tax and additional education fees.

PRC Business Tax

Revenues from services provided by TTB, Yanyu and Tranhold are subject to a PRC business tax of 5% and surtax of 0.5%. We pay business tax on gross revenues generated from our shipping agency services minus the costs of services, which are paid on behalf of our customers.

Recent Accounting Pronouncements

In April 2010, the FASB announced an update by the Securities and Exchange Commission (“SEC”) about accounting for certain tax effects of the 2010 health care reform acts (ASU No. 2010-12). The announcement addresses the SEC’s understanding of the Health Care and Education Reconciliation Act of 2010 signed by the President on March 30, 2010 and the other Patient Protection and Affordable Care Act signed on March 23, 2010 should be taken together as one to represent the current health care reforms. Therefore, companies should take both acts in consideration in the reports preparation. The company is currently assessing its implementation of this update, but does not expect a material impact on the Consolidated Financial Statements.

In March 2010, the FASB issued amended accounting guidance in the scope exception related to embedded credit derivatives (ASU No. 2010-11). The amendments clarify that the scope of embedded credit derivatives that requires the disclosure by the seller of this credit derivatives. Only embedded credit derivatives feature between the financial instruments created by subordination is an exception for the application. The amendments narrow down the scope exception related to embedded credit derivatives and are effective as of the beginning of the first fiscal quarter that begins after June 15, 2010. Early adoption is permitted. The Company currently does not issue or involve in any embedded credit derivatives and its obligations and believes the appliance with this guidance will not materially affect the Consolidated Financial Statements.

In February 2010, the FASB issued amended financial consolidation guidance to certain investment funds (ASU No. 2010-10). The amendments defer the disclosure requirement for a reporting entity’s interest in an entity that has all the attributes of an investment company or for investment companies that applied the industry practice for financial reporting principles. The guidance also clarifies the situations that a decision maker or service provider’s fee should be determined as a variable interest of the reporting entity. The amendments are expected to affect the reporting entities in the investment management industry and are effective as of the beginning of the first annual period that begins after November 15, 2009, and for interim periods within that first annual reporting period. Early application is not permitted. This updated guidance has no material impact on the Consolidated Financial Statements.

In February 2010, the FASB issued amended accounting guidance in certain recognition and disclosure requirements with regard to subsequent events (ASU No. 2010-09). In order to reduce the conflicts with some of the SEC’s regulations, the amendments require evaluation of subsequent events through the date that the financial statement are issued for an SEC filer or conduit bond obligor, but evaluation of subsequent events through the date the financial statements are available to be issued for an entity that meets neither of those criteria. However, the disclosure of the date through which subsequent events have been evaluated is not required for an SEC filer. In addition, the amendments require the reissuance disclosure for revised the financial statements only that include revision due to an error correction or retrospective application of US GAAP. This guidance is effective for interim or annual periods ending after June 15, 2010. The Company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

entities and real estate. The amendments are effective for the first reporting period beginning after this guidance issuance date, except for (1) reorganizations on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 but issued interim financial statements before this issuance that require retrospective application, and (2) certain existing contracts containing embedded derivative features adopted after December 15, 2009. The Company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued amended accounting guidance in mergers and acquisitions to not-for-profit entities (ASU No. 2010-07). The amendments clarify certain terms and provisions in mergers and acquisitions for not-for-profit entities, address the disclosure and financial consolidation obligations of the acquiring entity and describe the accounting methodology for certain accounts related to this type of business combination. The amendments are effective for the initial annual financial statements or the reporting period beginning on or after December 15, 2009. This updated guidance has no material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued amended accounting guidance in fair value measurements and disclosures (ASU No. 2010-06). In order to increase the transparency of the fair value measurements, the amendments clarify some certain existing disclosure requirements and also add more disclosure requirements regarding this topic. The amendments provide the guidance in the classification of assets or liabilities into three levels and require the disclosures of the reasons for the transfers among these levels. Moreover, the amendments require the disclosures of postretirement benefit plan assets. The amendments are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity that are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

In January 2010, the FASB announced an update by the SEC regarding stock compensation, escrowed share arrangements and the presumption of compensation (ASU No. 2010-05). The announcement describes the SEC’s presumption of compensation character in the escrowed share arrangement. If the purpose of the arrangement is unrelated to, and not contingent upon, continued employment, the release of escrowed shares is not compensatory. However, an escrowed share arrangement is considered as compensation if the escrowed shares are automatically forfeited as a result of employment termination. In addition, the discounts on debt instruments are amortized using the effective interest method, while discounts on common equity are not generally amortized. The announcement also clarifies the belief of the SEC that the benefit created by the shareholder’s escrow arrangement of the subsidiaries or related business partners should be reflected in the company’s financial statements even when the company is not party to the arrangement. The company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

In January 2010, the FASB announced an update by the SEC regarding technical corrections to SEC paragraphs regarding accounting for various topics (ASU No. 2010-04). The amendments claim that the posting of financial statements on the registrant’s website should be considered wide distribution to all shareholders and other financial statement users if the disclosure is consistent with the requirement of regulations. In addition, the amendments build the connection between the SEC’s and FASB’s provisions for the topics including valuation of acquired identifiable intangible assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, intangible assets arising from insurance contracts acquired in a business combination, lessor consideration of third-party value guarantees, management fees based on a formula, etc. The company is currently posting the updated financial statement on the website and believes the application of this update has no material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued amended accounting guidance in oil and gas reserve estimation and disclosures (ASU No. 2010-03). The amendments require the reporting for the oil and gas reserves in order to obtain a better valuation of oil and gas companies and are effective for annual reporting periods ending on or after December 31, 2009. This updated guidance has no material impact on the Consolidated Financial Statements.

entity is required to disclose the valuation techniques used in the fair value measurement for the derecognized entity or group of assets as well as the valuation techniques used in the business combination stage before its acquisition date, the nature of continuing involvement with the subsidiary or group of assets after the deconsolidation and derecognition, and whether the transaction occurring in the deconsolidation is with a related party or whether the former derecognized party will become a related party after the deconsolidation. The amendments are effective as of the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The company currently does is not involved in any type of derecogition or deconsolidation and believes the application has no material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued the amended accounting guidance in distributions to shareholders with components of stocks and cash. The amendments clarify the stock portion of a distribution to shareholders that allows them to elect to receive cash or shares with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate should be determined as a share issuance that will be reflected in the EPS calculation prospectively rather than a stock dividend for the purpose of earnings per share (EPS) manipulation or a new stock issuance by the management. The amendments redefine the definition of a stock dividend that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. The amendments are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The Company currently does not offer any stock dividend to the shareholders and believes the application has no material impact on the Consolidated Financial Statements.

In December 2009, the FASB issued amended accounting guidance for improvements to financial reporting by enterprises involved with variable interest entities (ASU No. 2009-17). The guidance clarifies the definition of VIEs as well as the obligations of each party and requires a primary beneficiary of VIEs to disclose the assumptions of the VIEs consolidation, the change in its most recent financials through the consolidation and its involvement with VIEs regarding to both quantitative and qualitative information. The amendment is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier adoption is prohibited. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In December 2009, the FASB issued amended accounting guidance for transfers of financial assets (ASU No. 2009-16). The amendment redefines the types of transfers and the term of sales of financial assets and points out the obligations for each party involved in the transfer service. The amendment is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier adoption is prohibited. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued amended accounting guidance for own-share lending arrangements in contemplation of convertible debt issuances or other financing (ASU No.2009-15). A share-lending arrangement is an agreement of prohibitive shares borrowing between a company and an investment banking firm to facilitate third-party investors’ exercise of conversion options in the company’s convertible debt. This amendment requires a disclosure of various items in terms of share-lending arrangements and is effective for fiscal years beginning on or after December 15, 2009, and interim period within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. Early adoption is not permitted. The Company currently does not issue any convertible debt and believes the application of this guidance will not materially impact the Consolidated Financial Statements.

In October 2009, the FASB issued amended revenue recognition guidance for arrangements with multiple deliverables (ASU No. 2009-13). The new guidance eliminates the residual method of revenue recognition and allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (“VSOE”), vendor objective evidence (“VOE”) or third-party evidence (“TPE”) is unavailable. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued guidance which amends the scope of existing software revenue recognition accounting (ASU No. 2009-14). Tangible products containing software components and non-software components that function together to deliver the product’s essential functionality would be scoped out of the accounting guidance on software and accounted for based on other appropriate revenue recognition guidance. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the Company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In September 2009, the FASB issued amended guidance concerning fair value measurements of investments in certain entities that calculate net asset value per share (or its equivalent) (ASU No.2009-12). If fair value is not readily determinable, the amended guidance permits, as a practical expedient, a reporting entity to measure the fair value of an investment using the net asset value per share (or its equivalent) provided by the investee without further adjustment. The Company adopted this guidance in the year ended December 31, 2009, and there was no material impact on the Consolidated Financial Statements.

In August 2009, the FASB issued guidance on the measurement of liabilities at fair value (ASU No. 2009-5). The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. The Company adopted this guidance in the year ended December 31, 2009 and there was no material impact on the Consolidated Financial Statements.

In June 2009, the FASB issued account Accounting Standard Update No. 2009-02. “Amendments to Various Topics for Technical Corrections”. This is an omnibus update, which is effective for financial statements issued for interim and annual periods ending after July 1, 2009. This Statement did not impact the Company’s consolidated financial results.

In June 2009, the FASB issued SFAS No. 168 (ASC No.105), “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (the “Codification”). The Codification, which was launched on July 1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this Statement for its year ended December 31, 2009. There was no change to the Company’s Consolidated Financial Statements due to the implementation of this Statement.

In June 2009, the FASB issued SFAS No. 167 (ASC No. 810), “Amendments to FASB Interpretation No. 46(R)” and SFAS No. 166 (ASC No. 860), “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (ASC No.860).” SFAS No. 167 amends FASB Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities (“QSPEs”). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The Company will adopt these Statements for interim and annual reporting periods beginning on January 1, 2010. The Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165 (ASC No. 855), “Subsequent Events.” This Statement 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 occur after the balance sheet date. This Statement is effective for interim and annual periods ending after June 15, 2009. The Company adopted this Statement in the year ended December 31, 2009. This Statement did not impact the consolidated financial results.

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 141(R)-1 (ASC No. 805), “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”, which amends the accounting in SFAS 141(R) for assets and liabilities arising from contingencies in a business combination. The FSP is effective January 1, 2009, and requires pre-acquisition contingencies to be recognized at fair value, if fair value can be reasonably determined during the measurement period. If fair value cannot be reasonably determined, the FSP requires measurement based on the recognition and measurement criteria of SFAS 5, “Accounting for Contingencies”. Adoption of FSP FAS 141(R)-1 did not have an impact on the Company’s financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 107-1 (ASC No. 825) and APB 28-1 (ASC No.270), “Interim Disclosures about Fair Value of Financial Instruments”. This FASB staff position amends FASB Statement No. 107 to require disclosures about fair values of financial instruments for interim reporting periods as well as in annual financial statements. The staff position also amends APB Opinion No. 28 to require those disclosures in summarized financial information at interim reporting periods. This FASB staff position becomes effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted these standards. The adoption of these standards did not materially impact its financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2 (ASC No. 320), “Recognition and Presentation of Other-Than-Temporary Impairments”. This FSP amends the other-than-temporary impairment guidance in GAAP for debt securities. If an entity determines that it has an other-than-temporary impairment on a security, it must recognize the credit loss on the security in the income statement. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The staff position expands disclosures about other-than-temporary impairment and requires that the annual disclosures in FASB Statement No. 115 and FSP FAS 115-1 and FAS 124-1 be made for interim reporting periods. This FSP becomes effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted this standard. The adoption of this standard did not materially impact its financial statements.

Management does not believe that other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC have or will have a material impact on our company’s present or future consolidated financial statements.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4/4T.

Controls and Procedures

Disclosure Controls and Procedures

As of March 31, 2010, our company carried out an evaluation, under the supervision of and with the participation of management, including our company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of our company’s disclosure controls and procedures. Based on the foregoing, the chief executive officer and chief financial officer concluded that our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

Not applicable.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None

(b)

The section entitled “Use of Proceeds” from our registration statement filed on April 3, 2009, as amended (the “Registration Statement”) is incorporated herein by reference. The effective date of the Registration Statement is August 10, 2009, and the Commission file number assigned to the Registration Statement is 333-158393. The Registration Statement registers the offering of up to 1,700,000 ordinary shares (subject to amendment in accordance with the Securities Act of 1933 and the rules and regulations promulgated thereunder) (the “Offering”). As of the date of this report, the Company has spent proceeds from the Offering in accordance with the following chart:


Description of Use	Proposed Expenditure Amount		Actual Expenditures through March 31, 2010
Working Capital	$	5,015,000	$	5,000,000
New Product Development		2,006,000		1,400,000
Application Expansion		1,504,500		1.050,000
Sales and Marketing		1,504,500		450,000
Total	$	10,030,000	$	7,900,000

(c)

None

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

(Removed and Reserved)

Item 5.

Other Information

None.

Item 6.

Exhibits

The following exhibits are filed herewith:


Exhibit Number		Document

3(i).1		Articles of Association of the Registrant⁽¹⁾

3(i).2		Amended and Restated Articles of Association of the Registrant⁽¹⁾

3(ii).1		Memorandum of Association of the Registrant⁽¹⁾

3(ii).2		Amended and Restated Memorandum of Association of the Registrant⁽¹⁾

4.1		Specimen Share Certificate⁽¹⁾

10.1		Translation of Form of Employment Agreement between Registrant and Executive Officer of the Registrant⁽¹⁾

10.2		Translation of Exclusive Technical and Consulting Service Agreement for Tranhold⁽¹⁾

10.3		Translation of Management Fee Payment Agreement for Tranhold⁽¹⁾

10.4		Translation of Proxy Agreement for Tranhold⁽¹⁾

10.5		Translation of Equity Interest Pledge Agreement for Tranhold⁽¹⁾

10.6		Translation of Exclusive Equity Interest Purchase Agreement for Tranhold⁽¹⁾

10.7		Translation of Exclusive Technical and Consulting Service Agreement for Yanyu⁽¹⁾

10.8		Translation of Management Fee Payment Agreement for Yanyu⁽¹⁾

10.9		Translation of Proxy Agreement for Yanyu⁽¹⁾

10.10		Translation of Equity Interest Pledge Agreement for Yanyu⁽¹⁾

10.11		Translation of Exclusive Equity Interest Purchase Agreement for Yanyu⁽¹⁾

10.14		Translation of Operating Agreement for Yanyu⁽¹⁾

10.15		Translation of Operating Agreement for Tranhold⁽¹⁾

10.16		Stock Option Plan⁽¹⁾

21.1		Subsidiaries of the Registrant⁽² ⁾

31.1		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ⁽³ ⁾

31.2		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ⁽³ ⁾

32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.⁽³ ⁾

32.2		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.⁽³ ⁾

⁽¹⁾	Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration No. 333-158393.

⁽²⁾	Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration No. 333-164273.

⁽³ ⁾	Filed herewith.

SIGNATURES

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


	Tri-Tech Holding Inc.

May 13, 2010	By:	/S/ PETER DONG
		Peter Dong
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

TRI-TECH HOLDING INC. AND SUBSIDIARIES

Financial Statements

For the quarters ended March 31, 2010 and 2009

(Prepared under accounting standards generally accepted in the United States of America)

TRI-TECH HOLDING INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page

CONSOLIDATED BALANCE SHEETS		F-1
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME		F-2
CONSOLIDATED STATEMENTS OF CASH FLOWS		F-3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		F-4 – F35

TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31, 2010		December 31, 2009
	(Unaudited)
ASSETS
Current Assets
Cash	$	7,202,236	$	7,171,464
Restricted cash		—		1,501,128
Accounts receivable, net of allowance for doubtful accounts of $62,448 and $56,491 as of March 31, 2010 and December 31, 2009, respectively		3,568,779		4,338,239
Unbilled revenue		6,471,224		3,952,763
Other receivables		359,784		273,602
Inventories		1,989,636		1,573,324
Deposits on projects		978,687		585,153
Prepayments to suppliers and subcontractors		3,088,153		1,898,900

Total current assets		23,658,499		21,294,573
Long-term unbilled revenue		1,724,331		1,723,852
Plant and equipment, net		432,226		374,009
Proprietary technology, net		1,073,497		797,854

	$	26,888,553	$	24,190,288


LIABILITIES AND EQUITY
Current liabilities
Accounts payable and cost accrual on projects	$	3,912,821	$	3,367,056
Customer deposits		628,796		494,047
Billings in excess of revenue		—		8,650
Other payables		120,228		8,633
Accrued liabilities		72,433		103,190
Deferred income taxes		—		141,478
Income taxes payable		239,106		144,232

Total current liabilities		4,973,384		4,267,286
Long-term liabilities		47,277		58,171

		5,020,661		4,325,457


Equity
Tri-Tech Holding Inc. shareholders’ equity
Common stock ($0.001 par value, 30,000,000 shares authorized;, 5,389,000 and 5,255,000 shares issued as of March 31,2010 and December 31, 2009, respectively; as of March 31, 2010, 340,000 shares issued were held in escrow. (See note 12))		5,389		5,255
Additional paid-in-capital		14,128,162		12,942,650
Statutory reserves		50,655		50,655
Retained earnings		7,150,957		6,333,343
Accumulated other comprehensive income		374,567		377,097

Total Tri-Tech Holding Inc. shareholders’ equity		21,709,730		19,709,000
Noncontrolling Interests		158,162		155,831

Total equity		21,867,892		19,864,831

	$	26,888,553	$	24,190,288

See notes to consolidated financial statements

F-1

TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME


	For The Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)
Revenues:
System integration	$	3,508,085		$	1,319,603
Hardware products		347,081			1,097,155
Software products		382,948			434,049

Total revenues		4,238,114			2,850,807

Cost of revenues: (exclusive of depreciation and amortization shown separately below)
System integration		2,151,215			883,633
Hardware products		309,740			887,880
Software products		10,283			10,211

Total cost of revenues(exclusive of depreciation and amortization shown separately below)		2,471,238			1,781,724

Operating expenses:
Depreciation and amortization expense		40,442			21,583
Selling and Marketing expenses		202,194			104,306
General and Administrative expenses		696,508			279,049

Total operating expenses		939,144			404,938

Income from operations		827,732			664,145

Other income (expenses):
Other expense		(4,850	)		(390	)
Interest income		9,694			435
Interest expense		(1,629	)		—
Tax rebates		56,965			—

Total other income (expenses), net		60,180			45

Income before provision for income taxes and noncontrolling interests income		887,912			664,190
Provision for income taxes		67,773			63,563

Net income before allocation to noncontrolling interests		820,139			600,627
Less: Net income attributable to noncontrolling interests		2,525			375

Net income attributable to Tri-Tech Holding Inc	$	817,614		$	600,252

Other comprehensive income
Foreign currency translation adjustment		(2,724	)		13,208

Comprehensive income	$	817,415		$	613,835
Less: Comprehensive income attributable to noncontrolling interests		2,331			349

Comprehensive income attributable to Tri-Tech Holding Inc.	$	815,084		$	613,486

Net income attributable to Tri-Tech Holding Inc. per share:
Basic	$	0.16		$	0.17
Diluted	$	0.15		$	0.17
Weighted Average number of common shares outstanding:
Basic		5,269,011			3,555,000
Diluted		5,559,260			3,555,000

See notes to consolidated financial statements

F-2

TRI-TECH HOLDING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For The Three Months Ended March 31,
	2010			2009
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income before allocation to noncontrolling interests	$	820,139		$	600,627
Adjustments to reconcile net income before noncontrolling interests to net cash provided by (used in ) operation activities:
Amortization of option expenses		91,480			—
Amortization of warrants		8,766			—
Depreciation and amortization		40,442			21,748
Provision for doubtful accounts		5,940			10,178
Deferred income taxes		(149,838	)		42,668
Changes in operating assets and liabilities:
Restricted cash		1,501,414			—
Accounts receivable		764,660			258,395
Unbilled revenue		(2,517,140	)		(744,534	)
Other receivables		(479,436	)		51,281
Inventories		(359,426	)		(368,318	)
Prepayments and deferred expenses		(1,164,248	)		340,332
Accounts payable		488,386			256,795
Customer deposits		134,600			167,149
Billings in excess of revenue		(8,652	)		—
Other payables		175,051			(23,449	)
Accrued liabilities		(30,782	)		—
Taxes payable		94,825			189,667

Net cash (used in) provided by operating activities		(583,819	)		802,539

Cash flows from investing activities:
Payment to purchase plant and equipment		(80,766	)		(950	)
Payment to purchase intangible asset		(292,959	)		—
Payment of installment of vehicle purchase		(10,909	)		—
Short-term loan to third parties		—			(213,584	)

Net cash used in investing activities		(384,634	)		(214,534	)

Cash flows from financing activities:
Proceeds from exercise of warrants into common stock		1,085,400			—

Net cash provided by financing activities		1,085,400			—

Effect of exchange rate changes on cash and cash equivalents		(86,175	)		(171,539	)

Net increase in cash and cash equivalents		30,772			416,466
Cash and cash equivalents, beginning of period		7,171,464			732,418

Cash and cash equivalents, end of period	$	7,202,236		$	1,148,884

Supplemental Data:
Income taxes paid	$	122,786		$	—

Interest paid on debt	$	1,629		$	—

See notes to consolidated financial statements

F-3

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements

March 31, 2010 and 2009

1. Background

Tri-Tech Holding Inc. (“TRIT”) was incorporated in the Cayman Islands on January 7, 2009 as a limited liability company and is authorized to issue 30,000,000 common shares, with a par value of $0.001. TRIT issued 50,000 common shares (or 3,555,000 common shares after 71.1-for-1 stock split which was completed on May 22, 2009) to shareholders of Tri-Tech International Investment, Inc. (“TTII”) for their respective interests in TTII. TTII was incorporated in the British Virgin Islands on November 24, 2005 as a limited liability company. TTII has subsidiaries and variable interest entities (“VIEs”) in the People’s Republic of China (the “PRC”) as discussed below. TRIT and its subsidiaries and variable interest entities together are referred to as the “Company”. Through its subsidiaries and VIEs in PRC, the Company provides self-manufactured, proprietary or third-party products, system integration and other services in the fields of environmental protection and water resource monitoring, development, utilization and protection.

On September 9, 2009, the Company completed its initial public offering (“IPO”) of 1,700,000 common shares at $6.75 per share.

Tri-Tech (Beijing) Co., Ltd. (“TTB”) was incorporated in the PRC on February 6, 2006. It is wholly-owned by TTII. It is a wholly foreign-owned high-tech enterprise, primarily engaged in water resource protection including the utilization and development of technology and product sales, and the development of new industries and applications.

Tranhold Environmental (Beijing) Tech Co., Ltd. (“Tranhold”) was established on June 6, 2003. It was a wholly-owned subsidiary of TTII until it was converted into a VIE controlled by TTB on November 28, 2008. (refer to the section “Reorganization and Acquisition”). Tranhold specializes in environmental technology research and development, environmental engineering design and building for major industrial sectors such as the petrochemical, pharmaceutical and municipal industries. It also provides water and wastewater treatment process control systems, process tail gas purification and other air pollution control systems and related integration solutions. Tranhold participated in the compilation of “The Technical Guidelines of Municipal Sewage Treatment Plant Operation, Management and Safety” for the Ministry of Construction of the People’s Republic of China.

Beijing Yanyu Water Tech Co., Ltd. (“Yanyu”) was established on March 29, 2002. It was a wholly-owned subsidiary of TTII until it was converted into a VIE controlled by TTB on November 28, 2008. (refer to the section “Reorganization and Acquisition”). Yanyu specializes in research and development, production, system integration, and consulting services in the fields of water resource protection and allocation, flood control and forecasting, irrigation systems, and municipal water supply and distribution systems. Yanyu participated in the compilation of “Technical Standards of Automatic Hydrologic Measuring and Report Systems (SL61-2003)” and “Technical Guidelines of Automatic Hydrologic Measuring and Reporting Systems – General Devices (GB/T)” for the Ministry of Water Resources of the PRC.

We recently formed Tri-Tech Infrastructure LLC. (“TIS”), our wholly-owned subsidiary in the U.S. to develop opportunities in the United States.

F-4

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Reorganization and Acquisition

On October 24, 2007, TTII and its wholly owned subsidiary TTB entered a sales and purchase agreement with the existing shareholders of Tranhold (the “Tranhold Original Shareholders”). Pursuant to the agreement, TTII issued 50,000 shares (equivalent to 1,777,500 common shares of TRIT after stock split) of its stock to the Tranhold Original Shareholders for 100% equity ownership of Tranhold. The total number of shares outstanding was 50,000 shares (equivalent to 1,777,500 common shares of TRIT after stock split). As a result of this transaction, the Tranhold Original Shareholders were able to exercise control of TTII. The purchase of Tranhold and the issuance of TTII’s common stock were accounted for as a reverse acquisition and as a recapitalization under common control. The assets and liabilities transferred were accounted for at historical cost. The consolidated financial statements have been presented as if the reorganization occurred at the beginning of 2007.

On December 31, 2007, TTII and its wholly owned subsidiary TTB completed a sales and purchase agreement with certain existing shareholders of Yanyu (the “Yanyu Original Shareholders”). Pursuant to the agreement, TTII issued 50,000 shares (equivalent to 1,777,500 common shares of TRIT after stock split) of its common stock to the Yanyu Original Shareholders for 92.86% equity ownership of Yanyu. Based on Statement of Financial Accounting Standards No. 141, “Business Combinations”, TTII is determined to be the acquirer. The allocation of the purchase price of Yanyu was based on the fair value of Yanyu as of December 31, 2007.


	December 31, 2007
Current Assets	$	1,836,705
Plant and equipment, net		44,298
Intangible assets		587,058
Liabilities assumed		(902,018	)

Total purchase price	$	1,566,043

The fair value of the assets and liabilities of Yanyu approximated the book value as of December 31, 2007.

As a result of these transactions, Tranhold and Yanyu became the subsidiaries of TTII.

The Company’s principal geographic market is mainly in the People’s Republic of China (“PRC”). As PRC laws and regulations prohibit or restrict other than PRC companies to engage in certain government-related businesses, the Company provides its services in the PRC through Tranhold and Yanyu, Chinese legal entities, which hold the qualifications and permits necessary to conduct government-related services in the PRC. In order to avoid any restrictions that Tranhold or Yanyu might encounter during future business development, the Company concluded that TTII and Tranhold or Yanyu should not have a parent-subsidiary relationship.

By November 28, 2008, the Company had completed two steps of reorganization. The Company first recalled its shares from the original shareholders of Tranhold and Yanyu. These shareholders are major shareholders, directors, corporate level executives and key employees of the Company. Legally, Tranhold and Yanyu returned to their legal status prior to the acquisitions in 2007. Concurrently, on November 28, 2008,

F-5

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

the Company signed and executed with Tranhold and Yanyu a series of contractual agreements with a 25-year, renewable term. These contractual agreements require the pledge of the original shareholders’ equity interests and stock certificates of the VIEs. At any time during the agreement period, the Company has absolute rights to acquire any portion of the equity interests of those VIEs under no-cost conditions. In addition, the Company has absolute rights to appoint directors and officers of those VIEs and to obtain the profits from those VIEs. These agreements consist of the following agreements (Operating Agreements subsequently entered):

Exclusive Technical and Consulting Service Agreement. Each of Yanyu and Tranhold has entered into an Exclusive Technical and Consulting Service Agreement with TTB, which agreement provides that TTB will be the exclusive provider of technical and consulting services to Yanyu and Tranhold, as appropriate, and that each of them will in turn pay 90% of its profits (other than net profits allocable to the State-Owned Entities (“SOE”) Shareholder of Yanyu) to TTB for such services. In addition to such payment, Yanyu and Tranhold agree to reimburse TTB for TTB’s expenses (other than TTB’s income taxes) incurred in connection with its provision of services under the agreement. Payments will be made on a quarterly basis, with any overpayment or underpayment to be reconciled once each of Tranhold’s and Yanyu’s annual net profits, as applicable, are determined at its fiscal year end. Any payment from TTB to TTII would need to comply with applicable Chinese laws affecting payments from Chinese companies to non-Chinese companies. Although based on this agreement TTB is only entitled to 90% of net profits (other than net profits allocable to the SOE Shareholder of Yanyu), TTB also entitled the remaining share of the net profits of the VIEs through dividends per the Proxy Agreement as discussed below. The Company relies on dividends paid by TTB for its cash needs, and TTB relies on payments from Yanyu and Tranhold to be able to pay such dividends to the Company.

Management Fee Payment Agreement. Each of the shareholders of Yanyu and Tranhold (other than Beijing YanYu Communications Telemetry United New Technology Development Department, a Chinese State Owned Entity (the “SOE Shareholder”) of Yanyu) has entered into a Management Fee Payment Agreement, which provides that, in the event TTB exercises its rights to purchase the equity interests of the Yanyu or Tranhold shareholders (other than those owned by the SOE Shareholder of Yanyu) under the Equity Interest Purchase Agreements, such shareholders shall pay a Management Fee to TTB in an amount equal to the amount of the Transfer Fee received by the such shareholders under the Equity Interest Purchase Agreement.

Proxy Agreement. Each of the shareholders of Yanyu and Tranhold (other than the SOE Shareholder of Yanyu) has executed a Proxy Agreement authorizing TTB to exercise any and all shareholder rights associated with his ownership in Yanyu or Tranhold, as appropriate, including the right to attend shareholders’ meetings, the right to execute shareholders’ resolutions, the right to sell, assign, transfer or pledge any or all of the equity interest in Yanyu or Tranhold, as appropriate, and the right to vote such equity interest for any and all matters.

Equity Interest Pledge Agreement. TTB and the shareholders of each of Tranhold and Yanyu (other than the SOE Shareholder of Yanyu) have entered in Equity Interest Pledge Agreements, pursuant to which each such shareholder pledges all of his shares of Tranhold or Yanyu, as appropriate, to TTB. If Tranhold or Yanyu or any of its respective shareholders (other than the SOE Shareholder of Yanyu) breaches its respective contractual obligations, TTB, as pledgee, will be entitled to certain rights, including the right to foreclose on

F-6

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

the pledged equity interests. Such Tranhold and Yanyu shareholders have agreed not to dispose of the pledged equity interests or take any actions that would prejudice TTB’s interest. According to this agreement, TTB has absolute rights to obtain any and full dividends related to the equity interest pledged during the term of the pledge.

Exclusive Equity Interest Purchase Agreement. Each of the shareholders of Tranhold and Yanyu (other than the SOE Shareholder of Yanyu) has entered into an Exclusive Equity Interest Purchase Agreement, which provides that TTB will be entitled to acquire such shares from the current shareholders upon certain terms and conditions, if such a purchase is or becomes allowable under PRC laws and regulations. The Exclusive Equity Interest Purchase Agreement also prohibits the current shareholders of each of Tranhold and Yanyu (other than the SOE Shareholder of Yanyu) from transferring any portion of their equity interests to anyone other than TTB. TTB has not yet taken any corporate action to exercise this right of purchase, and there is no guarantee that it will do so or will be permitted to do so by applicable law at such time as it may wish to do so.

Operating Agreements. TTB, Tranhold, Yanyu and each of their respective shareholders (other than the SOE Shareholder of Yanyu) have entered into an Operating Agreement on July 3, 2009, which requires TTB to guarantee the obligations of each of Tranhold and Yanyu in their business arrangements with third parties. Each of Tranhold and Yanyu, in return, agrees to pledge its accounts receivable and all of its assets to TTB. Moreover, each of Tranhold and Yanyu agrees that without the prior consent of TTB, such company will not engage in any transactions that could materially affect its assets, liabilities, rights or operations, including, without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of its assets or intellectual property rights in favor of a third party or transfer of any agreements relating to its business operation to any third party. Pursuant to these operating agreements, TTB provides guidance and instructions on each of Tranhold’s and Yanyu’s daily operations and financial affairs. The contracting shareholders of each of Tranhold and Yanyu must designate the candidates recommended by TTB as their representatives on their respective boards of directors. TTB has the right to appoint and remove senior executives of each of Tranhold and Yanyu.

The Company provided advances to its VIEs totaling $1,495,046 during the quarters ended March 31, 2010. The Company’s accumulated outstanding advances to Tranhold and Yanyu, respectively, were $6,589,299 and $805,157 as of March 31, 2010.

Except as disclosed above, there are no arrangements that could require the Company to provide financial support to the VIEs, including events or circumstances that could expose the Company to a loss. As stated in the disclosure of various agreements between the Company and its VIEs in note 1 under Reorganization and Acquisition, the Company has rights to acquire any portion of the equity interests of those VIEs under no-cost conditions. Also the Company may allocate its available funds to its VIEs for business purposes. There are no fixed terms of such arrangement.

In January 2010, Yanyu acquired 5 software products, which include BlueSky (large region environmental management system), Skylon MCMS V1.0 (mobile web management system), Skylon DLMS V1.0 (database management system), pollution reduction checking assistant, water pollution control infrastructure, and hired its associated software R&D persons, simultaneously. This purchase involves $293,000. This is attributable to Segment 2 (“Water Resource Management”). Through this purchase, we will

F-7

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

strengthen our service and provide better products for our customer, which integrates the acquired software products with our existing products and services. The customers are similar type of our previous customers of central and local government administrations, such as environmental protection department, hydrology department and other public utility. The Company intends to start the promotion and marketing campaign for these products. The actual payment is recorded as the cost of software for the acquired software.

Based on these agreements and according to the provisions of Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities” (or “FIN 46R”ASC NO.810), Tranhold and Yanyu are considered two variable interest entities (“VIEs”), and the Company is the primary beneficiary. Accordingly, Tranhold and Yanyu have continued to be consolidated in the Company’s financial statements.

It is the Company’s general belief that the creditors and the other beneficial interest holder of Tranhold and Yanyu have no recourse to the general credit of the Company.

No change occurred in the controlling interests before and after the Company entered into agreements with these VIEs.

VIE relationship is a combination of entities under common control, and all assets and liabilities are reported at their historical cost basis.

The following are major categories of the Assets and Liabilities of the VIEs:


	Yanyu			Tranhold
	March 31, 2010			March 31, 2010
	(Unaudited)
Current assets	$	3,158,698		$	11,877,539
Plant and equipment, net		26,565			400,143
Intangible assets		822,062			251,435
Long-term unbilled revenue		—			1,128,862
Liabilities assumed		(2,032,915	)		(6,132,997	)

Total shareholders’ equity	$	1,974,410		$	7,524,982


	Yanyu			Tranhold
	December 31, 2009			December 31, 2009
Current assets	$	3,010,585		$	11,133,068
Plant and equipment, net		27,660			343,011
Intangible assets		544,279			253,575
Long-term unbilled revenue		—			1,128,548
Liabilities assumed	$	(1,604,509	)	$	(5,336,339	)

Total shareholders’ equity	$	1,978,015		$	7,521,863

F-8

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements of Tri-Tech Holding Inc. (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial statements include all adjustments necessary, which are of a normal and recurring nature for the fair presentation of the results of the interim periods presented. All of the amounts included in this Report related to the condensed consolidated financial statements and notes thereto as of and for the three months ended March 31, 2010 and 2009 are unaudited. The interim results presented are not necessarily indicative of results for any subsequent interim period, the year ending December 31, 2010, or any future period.

The accompanying consolidated financial statements include the accounts of TRIT and its subsidiaries and VIEs. All material inter-company transactions and balances have been eliminated in the consolidation. Please also refer to Note 1 for the discussion on accounting for the reorganization and acquisition.

The Company adopted the provisions of FIN 46R (ASU NO.810). Pursuant to FIN 46R (ASC NO.810), Tranhold and Yanyu are VIEs of the Company and the Company is the primary beneficiary of the VIEs. Accordingly, the VIEs have been consolidated in the Company’s financial statements.

Based on various VIE agreements, the Company is able to exercise control over the VIEs; and obtain the financial interests such as obtaining periodic income of the VIEs through technical and consulting service arrangements and obtaining the net assets of VIEs through purchase of their equities at essentially no cost basis. The Company therefore concluded that its equities of both VIEs are not noncontrolling interest and therefore are not classified as so. The noncontrolling interest only relates to the SOE Shareholder’s 7.14% interest in Yanyu. They excise no controls over the VIEs and no financial interests of ownership are due to them either for periodic income or the net assets.

The Company compiles its daily accounts in accordance with generally accepted accounting principles in the PRC (“PRC GAAP”) and converts its financial statements to make them comply with U.S. GAAP when reporting.

For presentation of the financial statements, we assume the issuance of 3,555,000 common shares at the beginning of the period. On September 9, 2009, the Company completed its IPO of 1,700,000 common shares at $6.75 per share. On December 31, 2009, the Company had issued and outstanding 177,500 unexercised warrants (note 11) and 525,500 unexercised options (note 12). As of March 31, 2010, 134,000 warrants had been exercised at a price equal to $8.10 per share.

F-9

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Management believes that the estimates used in preparing its financial statements are reasonable and prudent. Actual results could differ from these estimates.

Certain of the Company’s accounting policies require higher degrees of judgment than others in their application. These include the recognition of revenue and earnings from system integration under the percentage of completion method and the allowance for doubtful accounts. Management evaluates all of its estimates and judgments on an on-going basis.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are composed primarily of time deposits and investments in money market accounts and are stated at cost which approximates fair value.

Restricted Cash

On December, 2009, the Company made a 3-months time deposit of RMB 10.25 million (or $1,501,128) in a bank as collateral in exchange for the issuance of a Letter of Credit facility of RMB 10 million (or $1,464,515), with an expiration in three months. However, the Company didn’t use the facility for any issuance of Letter of Credit within that period. Correspondingly, the bank released the collateral and the restrictions on cash on March 3, 2010.

Allowances for doubtful accounts

The Company makes an allowance for doubtful accounts based on the aging of accounts receivable and on any specifically identified accounts receivable that may become uncollectible.

Inventories

The Company values inventory at the lower of cost or net realizable value and determines inventory by using the average cost method. Inventory consists of raw materials, finished goods, and work-in-progress, which includes the cost of direct labor, materials and overhead costs related to projects.

Long-term unbilled revenue

The Company obtained several contracts with billing cycles of over three years in 2009. The discounted revenue is recorded as long-term unbilled revenue and the discount rate is the 3-year nominal interest rate of 5.4%, set by the PRC Central Bank. These projects are funded by the Government, so the Company does not ascribe any financial risks to such projects.

Plant and equipment

The Company states plant and equipment at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets with 5% residual value.

F-10

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Estimated useful lives of the Company’s assets are as follows:


Asset				Useful Life
Buildings and improvements				40 years
Transportation equipment				5-8 years
Machinery				10 years
Office equipment				5 years
Furniture				5 years

The Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the accounts and includes any gain or loss in the statement of income. The Company charges maintenance, repairs and minor renewals directly to expenses as incurred, and it capitalizes major additions and betterment to buildings and equipment.

Valuation of Long-Lived Assets

The Company reviews the carrying value of its long-lived assets, including plant and equipment, and finite life intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the estimated undiscounted future cash inflows attributable to the asset, less estimated undiscounted future cash outflows, are less than the carrying amount, the Company recognizes an impairment loss in an amount equal to the difference between the carrying value of such assets and fair value. No impairment indicator is noted in prior and current periods. The Company reports assets for which there is a committed disposition plan, whether through sale or abandonment, at the lower of carrying value or fair value less costs to sell. No such assets are identified in prior and current periods.

The Company evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances revised estimates of useful lives.

Intangible Assets

The Company amortizes other acquired intangible assets with definite lives on a straight-line basis over their expected useful economic lives. The Company does not amortize intangible assets with an indefinite useful life but subjects them to an impairment test annually or more frequently if events or changes in circumstances indicate that the assets might be impaired. The Company periodically evaluates the recoverability of all intangible assets and takes into account events or circumstances that revised estimates of useful lives or that indicate that impairment exists.


				Useful Life
Proprietary technology relating to sewage, municipal solid waste treatment and tail gas purification				20 years
Proprietary technology relating to low energy consumption data transmission system				20 years
Large region environmental management system				10 years
Mobile web management system				10 years
Database Management System				10 years
Pollution reduction checking assistant				10 years
Water pollution control infrastructure				10 years

F-11

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Balance Sheet Classifications

The Company uses a one-year time period as the basis for classifying all current assets and liabilities.

Revenue Recognition

Revenues consist primarily of hardware product sales, software product sales, and system integration sales. The Company recognizes revenue when it is probable that the economic benefits will flow to the Company.

Specifically the Company generally provides system integration under short and long-term fixed-price contracts. The contract periods range from two months to approximately three years in length. The Company recognizes income for these contracts following the percentage-of-completion method, measured by contract milestones in accordance with the AICPA’s Statement of Position (“SOP”) 81-1 (ASC No. 605), “Accounting for Performance of Construction-Type and Certain Production-Type Contracts”. Cost of revenue (exclusive of depreciation and amortization expenses) is based on total actual costs incurred plus estimated costs to completion applied to percentage of completion as measured by contract milestone. Cost of revenues (exclusive of depreciation and amortization expenses) includes direct labor, materials and the applicable share of overhead expense directly related to the execution of services and delivery of projects.

Provided unapproved change orders or claims occur in the future, in accounting for contracts, the Company follows Paragraphs 62 and 65 of the AICPA’s Statement of Position 81-1 - Accounting for Performance of Construction-Type and Certain Production-Type Contracts (“SOP 81-1”) (ASC No. 605). We will recognize as revenues costs associated with unapproved change orders (Paragraph 62 of SOP 81-1) or claims (Paragraph 65 of SOP 81-1) to the extent it is probable that such claims and change orders will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated. Contract losses are provided for in their entirety in the period that they become known, without regard to the percentage-of-completion. However, we have not experienced significant unapproved change orders in the past.

The Company recognizes sales of its hardware products upon delivery of goods and passage of title in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements”, as amended by SAB No. 104 (ASC No. 605), “Revenue Recognition”.

The Company recognizes revenue from the sales of software products, support contracts and services in accordance with SOP No. 97-2, “Software Revenue Recognition” and SOP 81-1. For software sales with no significant post-shipment obligations and no uncertainty about customer acceptance, the Company recognizes revenue on delivery of software to the customer. The Company recognizes revenues for software sales with significant post-shipment obligations, including the production, modification, or customization of software, by the percentage-of-completion method, with progress to completion measured on the basis of milestone completion, labor costs incurred currently versus the total estimated labor cost of performing the contract over its term, or other factors appropriate to the individual contract of sale. For the three months ended March 31 2010 and 2009, no software sales with significant post-shipment obligations occurred.

F-12

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

NO postcontract customer support (“PCS”) arrangement is included in the software sales.

The Company presents all sales revenue net of a value-added tax (“VAT”) or a sales tax. The Company’s products that are sold in the PRC are generally subject to a Chinese VAT at a rate of 17% or sales tax of 5% of the gross sales price, except for certain proprietary software sales which will only be subject to an effective tax rate of 3%. The VAT may be offset by VAT paid by the Company on purchased raw materials and other materials included in the cost of projects or producing the finished product.

The Company records revenue in excess of billings as “unbilled revenue”. The Company records billings in excess of revenues as “billings in excess of revenue”. The Company expects all billed and unbilled amounts to be collected within one year except for the contract mentioned bellow which has been classified in Long-term assets on the consolidated balance sheets as of March 31, 2010 and December 31, 2009.

The Company obtained several contracts with the billing cycle over three years in 2009. The discounted revenue is recorded and the discount rate is the 3-year nominal interest rate of 5.4%, set by the PRC Central Bank.

Cost of revenues (exclusive of depreciation and amortization)

Cost of revenues (exclusive of depreciation and amortization) includes material and equipment costs, transportation costs, labor costs, processing costs, packaging costs, quality inspection cost, quality control costs, sales tax. Cost of revenues (exclusive of depreciation and amortization) also includes inbound freight charges, purchasing and receiving costs and inspection costs where those types of costs occur.

Operating expenses

Operating expenses include, among other items, salaries, bonuses, and social insurance of management, administrative and sales personal, traveling costs, entertainment expenses, depreciation of equipment, amortization of intangible assets, office rental expenses, professional service fees, office supplies, R&D expenses and bad debt provision.

Research and Development

Research and development expenses include salaries, consultant fees, supplies and materials, as well as costs related to other overhead such as depreciation, facilities, utilities and other departmental expenses. The Company expenses costs for the development of new software products and substantial enhancements to existing software products as incurred until technological feasibility has been established, at which time any additional costs are capitalized. The management of the Company is responsible for assessing the establishment of technological feasibility in accordance with FAS 86(ASC NO.985), Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.

Research and development costs recorded in general and administrative expenses were $39,338 and $53,712 during the quarters ended March 31, 2010 and 2009. No research and development expenses were capitalized in that period respectively. We do not pass along research and development expenses directly or indirectly to our customers.

F-13

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Foreign Currency Translation

The Company uses the United States dollar as its reporting and functional currency. The Company translates monetary assets and liabilities denominated in currencies other than United States dollars into United States dollars at the rates of exchange ruling at the balance sheet date. The Company converts transactions in currencies other than United States dollars during the year into United States dollars at the rates of exchange ruling at the transaction dates.

The Company maintains its financial records of its PRC subsidiaries in Renminbi (“RMB”), their functional currency and the currency of the PRC. The Company translates its balance sheets assets and liabilities into United States dollars at the rates of exchange existing on the balance sheet date and translates its PRC subsidiaries’ and affiliates’ statements of operations using a weighted average exchange rate for the same period. The Company reflects translation adjustments as “accumulated other comprehensive income (loss)” in stockholders’ equity

Income Taxes

The Company provides for deferred income taxes using the asset and liability method. Under this method, the Company recognizes deferred income taxes for tax credits and net operating losses available for carry-forwards and significant temporary differences. The Company classifies deferred tax assets and liabilities as current or non-current based upon the classification of the related asset or liability in the financial statements or the expected timing of their reversal if they do not relate to a specific asset or liability. The Company provides a valuation allowance to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48” (ASC NO.740)), as of January 1, 2007. The Company recognizes a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that the Company believes is more than 50% likely to be realized on examination. For tax positions not meeting the “more likely than not” test, the Company does not record a tax benefit. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The adoption had no effect on the Company’s financial statements. The Company did not have any significant unrecognized uncertain tax positions.

F-14

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

The Company’s operations are subject to income and transaction taxes mainly in the PRC. Significant estimates and judgments are required in determining the Company’s provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. The ultimate amount of tax liability may be uncertain as a result. The Company does not anticipate any events which could change these uncertainties.

Stock-based Compensation

The Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)” (ASC NOs.505,718)).

Earnings per Share

Basic EPS excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (convertible preferred stock, forward contract, warrants to purchase common stock, contingently issuable shares, common stock options and warrants and their equivalents using the treasury stock method) were exercised or converted into common stock. The Company excludes potential common shares in the diluted EPS computation in periods of losses from continuing operations, as their effect would be anti-dilutive.

We have granted 525,500 options to our key employees and 177,500 warrants to the placement agent in our IPO and to our investor relations consultant, all of which are included when calculating the earnings per share diluted. As of March 31, 2010, 134,000 warrants had been exercised at a price equal to $8.10 per share.

Comprehensive Income (Loss)

Comprehensive income (loss) includes all changes in equity except those resulting from investments by owners and distributions to owners. The Company has chosen to report comprehensive income (loss) in the statements of operations and comprehensive income.

Financial Instruments

The Company carries the carrying value of financial instruments, which consists of cash and cash equivalents, short-term investments, accounts receivable, trade notes receivable, accounts payable, trade notes payable, and other payables at cost, which approximates fair value due to the short-term nature of these instruments. The Company does not use derivative instruments to manage risks.

Segments

The Company identifies segments by reference to its internal organization structure and the factors that management uses to make operating decisions and assess performance.

F-15

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Reclassifications

The Company has reclassified certain prior period amounts to conform to the current period presentation. These reclassifications did not affect net income or cash flows.

Recently Issued Accounting Pronouncements

In April 2010, the FASB announced an update by the Securities and Exchange Commission (SEC) about accounting for certain tax effects of the 2010 health care reform acts (ASU No. 2010-12). The announcement addresses the SEC’s understanding of the Health Care and Education Reconciliation Act of 2010 signed by the President on March 30, 2010 and the other Patient Protection and Affordable Care Act signed on March 23, 2010 should be taken together as one to represent the current health care reforms. Therefore, companies should take both acts in consideration in the reports preparation. The company is currently assessing its implementation of this update, but does not expect a material impact on the Consolidated Financial Statements.

In March 2010, the FASB issued amended accounting guidance in the scope exception related to embedd credit derivatives (ASU No. 2010-11). The amendments clarify that the scope of embedded credit derivatives that requires the disclosure by the seller of this credit derivatives. Only embedded credit derivatives feature between the financial instruments created by subordination is an exception for the application. The amendments narrow down the scope exception related to embedded credit derivatives and are effective as of the beginning of the first fiscal quarter that begins after June 15, 2010. Early adoption is permitted. The company currently does not issue or involve in any embedded credit derivatives and its obligations and believes the appliance with this guidance will not materially affect the Consolidated Financial Statements.

In February 2010, the FASB issued amended financial consolidation guidance to certain investment funds (ASU No. 2010-10). The amendments defer the disclosure requirement for a reporting entity’s interest in an entity that has all the attributes of an investment company or for investment companies that applied the industry practice for financial reporting principles. The guidance also clarifies the situations that a decision marker or service provider’s fee should be determined as a variable interest of the reporting entity. The amendments are expect to affect the reporting entities in the investment management industry and are effective as of the beginning of first annual period that begins after November 15, 2009, and for interim periods within that first annual reporting period. Early application is not permitted. This updated guidance has no material impact on the Consolidated Financial Statements.

In February 2010, the FASB issued amended accounting guidance in certain recognition and disclosure requirements regarding to subsequent events (ASU No. 2010-09). In order to reduce the conflicts with some of the Securities and Exchange Commission’s (SEC) regulations, the amendments require to evaluate subsequent events through the date that the financial statement are issued for an SEC filer or conduit bond obligor, but to evaluate subsequent events through the date the financial statements are available to be issued for an entity meets neither of those criteria. However, the disclosure of the date through which subsequent events have been evaluated is not required for an SEC filer. In addition, the amendments require the reissuance disclosure for revised the financial statements only that include revision due to an error correction or retrospective application of US GAAP. This guidance is effective for interim or annual periods ending after June 15, 2010. The company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

F-16

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

In February 2010, the FASB issued technical corrections to various topics (ASU No. 2010-08). The amendments eliminate the inconsistencies and outdated provisions and provide the needed clarifications on the topics of statement of cash flows, Changing prices, limited liability entities, investments, intangibles, income taxes, business combinations, consolidation, derivates and hedging, nonmonetary transactions, reorganizations, health care entities and real estate. The amendments are effective for the first reporting period beginning after this guidance issuance date, except for 1) reorganizations that is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 but issued interim financial statements before this issuance that require retrospective application, and 2) certain existing contracts containing embedded derivative features adopting after December 15, 2009. The company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued amended accounting guidance in fair value measurements and disclosures (ASU No. 2010-06). In order to increase the transparency of the fair value measurements, the amendments clarify some certain existing disclosure requirements and also add more disclosure requirements regarding to this topic. The amendments provide the guidance in the classification of assets or liabilities into three levels and require the disclosures of the reasons for the transfers among these levels. Moreover, the amendments require the disclosures of postretirement benefit plan asset. The amendments are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity that are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. The company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

In January 2010, the FASB announced an update by Securities and Exchange Commission (SEC) about stock compensation: escrowed share arrangements and the presumption of compensation (ASU No. 2010-05). The announcement describes the SEC’s presumption of compensation character in the escrowed share arrangement. If the purpose of arrangement is unrelated to, and not contingent upon, continued employment, the release of escrowed shares is not subject to compensatory but the transaction on the behalf of the company. However, an escrowed share arrangement is considered as compensation if the escrowed shares are automatically forfeited as a result of employment termination. In addition, the discounts on debt instruments are amortized using the effective interest method, while discounts on common equity are not generally amortized. The announcement also clarifies the belief of the SEC that the benefit created by the shareholder’s escrow arrangement of the subsidiaries or related business partners should be reflected in the company’s financial statements even when the company is not party to the arrangement. The company is currently assessing its implementation of this guidance, but does not expect a material impact on the Consolidated Financial Statements.

F-17

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

In January 2010, the FASB announced an update by the Securities and Exchange Commission (SEC) about technical corrections to SEC paragraphs regarding to accounting for various topics (ASU No. 2010-04). The amendments claim that the posting of financial statements on the registrant’s website should be considered wide distribution to all shareholders and other financial statement users if the disclosure is consistent with the requirement of regulations. In addition, the amendments build the connection between the SEC’s and FASB’s provisions for the topics including valuation of acquired identifiable intangible assets other than goodwill, adjustments in assets and liabilities for holding gains and losses, intangible assets arising from insurance contracts acquired in a business combination, lessor consideration of third-party value guarantees, management fees based on a formula, etc. The company is currently posting the updated financial statement on the website and believes the application of this update has no material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued amended accounting guidance in oil and gas reserve estimation and disclosures (ASU No. 2010-03). The amendments require the reporting for the oil and gas reserves in order to a better valuation of oil and gas companies and are effective for annual reporting periods ending on or after December 31, 2009. This updated guidance has no material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued amended accounting guidance in decreases in ownership of a subsidiary (ASU No. 2010-02). The amendments clarify the scope of the decrease in ownership that sales of in substance real estate and conveyances of oil and gas mineral rights are not included in this domain. Moreover, the amendments require additional disclosures about the deconsolidation of a subsidiary or derecognition of a group of assets. The entity is required to disclose the valuation techniques used to the fair value measurement for the derecognized entity or group of assets as well as the valuation techniques used in the business combination stage before its acquisition date, the nature of continuing involvement with the subsidiary or group of assets after the deconsolidation and derecognition, and whether the transaction occurring in the deconsolidation is with a related party or whether the former derecognized party will become a related party after the deconsolidation. The amendments are effective as of the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The company currently does not involve in any type of derecogition or deconsolidation and believes the application has no material impact on the Consolidated Financial Statements.

In January 2010, the FASB issued the amended accounting guidance in distributions to shareholders with components of stocks and cash. The amendments clarify the stock portion of a distribution to shareholders that allows them to elect to receive cash or shares with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate should be determined as a share issuance that will be reflected in the EPS calculation prospectively rather than a stock dividend for the purpose of earning per share (EPS) manipulating or new stock issuance by the management in the practice in reality. The amendments redefine the definition of stock dividend that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. The amendments are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The company currently does not offer any stock dividend to the shareholders and believes the application has no material impact on the Consolidated Financial Statements.

F-18

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

In December 2009, the FASB issued amended accounting guidance for improvements to financial reporting by enterprises involved with variable interest entities (ASU No. 2009-17). The guidance clarifies the definition of VIEs as well as the obligations of each party and requires a primary beneficiary of VIEs to disclose the assumptions of the VIEs consolidation, the change in its most recent financials through the consolidation and its involvement with VIEs regarding to both quantitative and qualitative information. The amendment is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier adoption is prohibited. The company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In December 2009, the FASB issued amended accounting guidance for transfers of financial assets (ASU No. 2009-16). The amendment redefines the types of transfers and the term of sales of financial assets and points out the obligations for each party involving in the transfer service. The amendment is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier adoption is prohibited. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued amended accounting guidance for own-share lending arrangements in contemplation of convertible debt issuance or other financing (ASU No.2009-15). A share-lending arrangement is an agreement of prohibitive shares borrowing between a company and an investment banking firm to facilitate third-party investors’ exercise of conversion options in the company’s convertible debt. This amendment requires a disclosure of a various items in terms of share-lending arrangements and is effective for fiscal years beginning on or after December 15, 2009, and interim period within those fiscal years for arrangements outstanding as of the beginning of those fiscal years. Early adoption is not permitted. The Company currently does not issue any convertible debt and believes the application of this guidance will not materially impact the Consolidated Financial Statements.

F-19

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

a fiscal year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the Company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In June 2009, the FASB issued account Accounting Standard Update No. 2009-02. “Amendments to Various Topics for Technical Corrections”. This is an omnibus update, which is effective for financial statements issued for interim and annual periods ending after July 1, 2009. This Statement did not impact the Company’s consolidated financial results.

In June 2009, the FASB issued SFAS No. 168 (ASC No.105), “The FASB Accounting Standards Codification^TMand the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (the “Codification”). The Codification, which was launched on July 1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this Statement for its year ended December 31, 2009. There was no change to the Company’s Consolidated Financial Statements due to the implementation of this Statement.

In June 2009, the FASB issued SFAS No. 167 (ASC No. 810), “Amendments to FASB Interpretation No. 46(R)” and SFAS No. 166 (ASC No. 860), “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (ASC No.860).” SFAS No. 167 amends FASB Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities (“QSPEs”). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the

F-20

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The Company will adopt these Statements for interim and annual reporting periods beginning on January 1, 2010. The Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165 (ASC No. 855), “Subsequent Events.” This Statement 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 occur after the balance sheet date. This Statement is effective for interim and annual periods ending after June 15, 2009. The Company adopted this Statement in the year ended December 31, 2009. This Statement did not impact the consolidated financial results.

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 141(R)-1 (ASC No. 805), “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”, which amends the accounting in SFAS 141(R) for assets and liabilities arising from contingencies in a business combination. The FSP is effective January 1, 2009, and requires pre-acquisition contingencies to be recognized at fair value, if fair value can be reasonably determined during the measurement period. If fair value cannot be reasonably determined, the FSP requires measurement based on the recognition and measurement criteria of SFAS 5, “Accounting for Contingencies”. Adoption of FSP FAS 141(R)-1 did not have an impact on the Company’s financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 107-1 (ASC No. 825) and APB 28-1 (ASC No.270), “Interim Disclosures about Fair Value of Financial Instruments”. This FASB staff position amends FASB Statement No. 107 to require disclosures about fair values of financial instruments for interim reporting periods as well as in annual financial statements. The staff position also amends APB Opinion No. 28 to require those disclosures in summarized financial information at interim reporting periods. This FASB staff position becomes effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted these standards. The adoption of these standards did not materially impact its financial statements.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2 (ASC No. 320), “Recognition and Presentation of Other-Than-Temporary Impairments”. This FSP amends the other-than-temporary impairment guidance in GAAP for debt securities. If an entity determines that it has an other-than-temporary impairment on a security, it must recognize the credit loss on the security in the income statement. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The staff position expands disclosures about other-than-temporary impairment and requires that the annual disclosures in FASB Statement No. 115 and FSP FAS 115-1 and FAS 124-1 be made for interim reporting periods. This FSP becomes effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted this standard. The adoption of this standard did not materially impact its financial statements.

F-21

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

3. Accounts Receivable

Based on the Company’s valuation review, management believes the net balance on each balance sheet date herein was collectable.

The following analysis details the changes in the Company’s allowances for doubtful accounts during the quarters ended March 31, 2010 and December 31, 2009:


	March 31, 2010		December 31, 2009
	(Unaudited)
Balance at beginning of the year	$	56,491	$	62,286
Increase in allowances during the period		5,957		1,380
Write-offs during the period		—		(7,175	)

Balance at the end of the year	$	62,448	$	56,491

4. Inventories

Inventories consisted of the following:


	March 31, 2010		December 31, 2009
	(Unaudited)
Raw materials	$	139,834	$	140,048
Finished goods		759,469		360,152
Project work-in-progress		1,090,333		1,073,124

Totals	$	1,989,636	$	1,573,324

The Company reviews its inventory periodically for possible obsolete goods and to determine if any reserves are necessary for potential obsolescence. As of March 31, 2010 and December 31, 2009, the Company determined that no more reserves were necessary.

5. Deposits on Projects

Deposits on Projects consisted of the following:


	March 31, 2010		December 31, 2009
	(Unaudited)
Contract deposit	$	685,483	$	523,505
Bidding deposit		293,204		61,648

Totals	$	978,687	$	585,153

Contract deposits are paid to customers for promising the service or products will be properly and timely provided. Bidding deposits are paid as a deposit for involving in the bidding process. All the deposits will be utilized within one year.

F-22

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

6. Plant and Equipment, net

Plant and equipment consist of the following:


	March 31, 2010			December 31, 2009
	(Unaudited)
Transportation equipment	$	384,410		$	308,042
Office equipment		211,223			206,674
Furniture		13,990			13,986

Total plant and equipment		609,623			528,702
Less accumulated depreciation		(177,397	)		(154,693	)

Plant and equipment, net	$	432,226		$	374,009

The depreciation expense for the quarters ended March 31, 2010 and 2009 amounted to $22,704 and $9,119, respectively.

7. Proprietary technology, net

Proprietary technology mainly represents patents and software. Patents were invested as capital contribution by the minority shareholder of Tranhold and the majority shareholder of Yanyu and were recorded at appraisal value as stipulated by local regulatory authority. Software was purchased from third parties at the acquisition cost. All proprietary technology have definite lives, and are amortized on a straight-line basis over their expected useful economic lives. The original costs and accumulated amortization as at March 31 2010 and December 31 2009 are as follows:


	March 31, 2010			December 31, 2009
	(Unaudited)
Proprietary technology	$	1,718,940		$	1,425,559
Less accumulated amortization		(645,443	)		(627,705	)

Proprietary technology, net	$	1,073,497		$	797,854

According to ASC 845-10-S99, transfers of nonmonetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the company’s initial public offering normally should be recorded at the transferors’ historical cost basis determined under GAAP. The net book value of the patents invested by the majority shareholders of Yanyu was $533,961 as of March 31, 2010 which only accounted for 1.99% of its total assets as of March 31, 2010, therefore, the effect from the inclusion of the contributed patents at its fair value instead of historical cost was immaterial.

The amortization expense for the quarters ended March 31, 2010 and 2009 amounted to $ 17,738 and $12,464, respectively.

F-23

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

8. Prepayments to suppliers and subcontractors

Prepayments are monies deposited with or advanced to subcontractors to perform services on system contracting projects. Some subcontractors require a certain amount of money to be deposited as a guaranty payment in order for them to start performing the services. Prepayments also include monies deposited or advanced to vendors on future inventory purchases to ensure timely delivery.

9. Accounts payable and cost accrual on projects

This account contains the accruals of costs incurred in the projects in accordance with the percentage of completion method. Cost accrual on projects is $2,637,248 and $2,433,407 as of March 31, 2010 and December 31, 2009, respectively.

10. Long-term liabilities

Company purchased transport equipment payable on installments, pursuant to the payment agreement, the remaining payments totally $47,277 will be repaid within 13 months at $3,637 per month from March 31, 2010.

11. Income Taxes

Under the Income Tax Laws of the PRC, before 2008, domestic companies in the PRC were generally subject to an income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes) on income reported in the statutory financial statements after appropriate tax adjustments, unless (a) the enterprise was located in a specially designated region which allowed enterprises a three-year income tax exemption and a 50% income tax reduction for the following three years or (b) the enterprise was a manufacturing related joint venture with a foreign enterprise or a wholly-owned subsidiary of a foreign enterprise, which was allowed a two-year income tax exemption and a 50% income tax reduction for the following three years.

Under the Income Tax Laws of the Beijing State Administration Taxation of PRC, any enterprise with manufacturing operations in the city of Beijing that is a wholly owned subsidiary of a foreign enterprise is subject to an income tax rate of 24%.

According to an approval document (Taxation Notice No. 201 (2008)) from the Beijing State Tax Bureau of Xicheng District, TTB was granted an income tax exemption in 2007 and 2008 and reduced income tax rates of 10%, 11%, and 12% from 2009 to 2011, on the basis of being a high-tech company.

According to an approval document from the Beijing State Tax Bureau of Haidian District, Tranhold was granted an income tax exemption in 2004 and 2005 and a half reduced income tax rate from the normal rate of 15% from 2006 to 2008, on the basis of being a high-tech company. Before being re-identified as High-technology Enterprise in accordance with new legislation, the income tax rates of Tranhold will be 25% in 2009 and beyond.

F-24

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

According to an approval document from the Beijing State Tax Bureau of Haidian District, Yanyu was granted, on the basis of being a high-tech and software company, an income tax exemption in 2003 and 2004 and a half reduced income tax rate from the normal rate of 15% from 2005 to 2007. Before being re-identified as High-technology Enterprise in accordance with new legislation, the income tax rates of Yanyu will be 25% in 2009 and beyond.

Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law replaced the existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”).

The key changes are:

The new standard EIT rate of 25% will replace the 33% rate currently applicable to both DES and FIEs, except for high-tech companies which have a reduced rate of 15%;

Companies established before March 16, 2007 will continue to enjoy tax holiday treatment approved by the local government for a grace period of the next 5 years or until the tax holiday term is completed, whichever is sooner.

However, on May 27, 2009, TTB received Taxation Notice No. 9 (2009) from the Beijing State Tax Bureau of Xicheng District, which superseded Taxation Notice No. 201 (2008) mentioned above.

According to Taxation Notice No. 9 (2009), TTB is required to pay income at the rate of 25% for the fiscal year ended December 2008. As a result, the Company was required to pay additional $139,562 for the fiscal year ended December 31, 2008.

Pursuant to the Taxation Notice and supplementary regulations, only the high-tech companies re-certified under the new criteria of high-tech enterprise are granted the preferred tax rates.

According to State Tax Notice No. 203 (2009) issued by State Administration of Taxation on April 22, 2009, neither Tranhold nor Yanyu is qualified for preferred tax benefits for high-tech enterprise until they are re-certified as high-tech enterprises under the newly revised criteria for high-tech enterprises. Both Tranhold and Yanyu are currently subject to 25% income tax rate. As a result, the Company accrued $32,925 deferred income tax liability for the fiscal year ended December 31, 2008.

TTB has already certified as a high-tech enterprise under the new criteria in December 2009.

According to Taxation Notice No. 1 (2010) from the Beijing State Tax Bureau of Xicheng, District, TTB is subject to 7.5% income tax rate, from January 1, 2009 to December 31, 2011.

The Company had paid income taxes $122,786 for the quarter ended March 31, 2010.

Yanyu had accumulated net operating losses of RMB6,152,353 (approximately $901,272) for income tax purposes as of March 31, 2010. These net operating losses can be carried forward for 5 years to reduce future years’ PRC taxable income. Tranhold had accumulated net operating losses of RMB589,992 (approximately $86,429) for income tax purposes as of March 31, 2010. These net operating losses can be carried forward for 5 years to reduce future years’ PRC taxable income. These carry forwards will expire, if not utilized, beginning in 2011 and continue through 2016.

F-25

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

The Beijing Tax Bureau generally conducts annual audits of income tax by commissioning an accounting firm or tax auditing firm, although the tax bureau will do it by itself when they feel there is need to do so. No tax bureau audits have been performed on the subsidiary or VIEs in the PRC so far. Tax audits by auditing firms for TTB, Tranhold and Yanyu have been performed through, 2008. All subsidiaries and VIEs of the Company file their tax returns in accordance with the audit reports issued by the auditing firm.

The provision for income tax expense (benefit) from continuing operations consists of the following:


	For the three Months Ended March 31,
	2010		2009
	(Unaudited)		(Unaudited)
Current:
PRC	$	67,773	$	54,347
Deferred:
PRC		—		9,216

Total income tax expense (benefit)	$	67,773	$	63,563

Significant components of the Company’s net deferred tax assets/(liabilities) are as follows:


	March 31, 2010		December 31, 2009
	(Unaudited)
Deferred tax assets:
Net operating loss carry forwards		—		140,814
Deferred tax liabilities:
Revenue recognition based on percentage of completion		—		282,292

Total net deferred tax assets(liabilities)	$	—	$	(141,478	)

Income Tax Reconciliation for three months ended March 31, 2010 and 2009 are as follows:


	For the three Months Ended March 31,
	2010		2009
	(Unaudited)		(Unaudited)
PRC federal statutory tax rate	25	%	25	%
Taxable income	896,678		664,188
Computed expected income tax expense	224,170		116,047
Effect of tax holidays	(156,397	)	(102,484	)

	67,773		63,563

F-26

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

12. Equity

On September 9, 2009, the Company completed its initial public offering (“IPO”) of 1,700,000 common shares at $6.75 per share. In order to mitigate some of the risk of valuing the Company on a forward-looking basis, each of the founders of TRIT placed into escrow , on a pro rated basis, that number of common shares that was equal to 20% of the number of shares sold in the IPO (“Founders’ Shares”) or 340,000 shares. If TRIT’s 2009 EPS equaled or exceeded $0.7205 (calculated before the effects of the expenses related to Warrants, Options and escrow shares, and with the assumption as indicated above), then the Founders’ Shares were to be released to the Founders from escrow. Because the Founders’ Shares were escrowed as a condition of completing the IPO and were to be released to the Founders without regard to the shareholders’ continued employment if TRIT met the foregoing criteria, we have determined that no compensatory arrangement exists. Accordingly, we have accounted for the escrow shares as an element of the overall transaction and will not recognize any compensation expense upon the return of escrow shares to the Founders. If our Company did not meet the criteria for releasing the Founders’ Shares, then we were obligated to redeem the Founders’ Shares without payment, resulting in the reduction of TRIT shares outstanding. Basic EPS was 0.94 for fiscal year 2009, therefore the criteria were met and no accounting treatment was made accordingly. Since the Company is preparing a second-round financing (Note 22), which will also have escrow shares criteria, the escrow shares are not released as at March 31, 2010.

13. Warrants

On September 9, 2009, the Company issued to Anderson & Strudwick Incorporated 170,000 warrants, as a portion of the placement commission for the IPO. On the same day, the Company issued a total of 7,500 warrants to Hawk Associates Inc., the Company’s investor relations consultancy. The Company issued 177,500 warrants as of December 31, 2009. All warrants can be exercised at a price equal to $8.10 per share, at any time on and after 180 days from the grant date. The expiration date for the warrants is September 9, 2014.

As of March 31, 2010, 134,000 warrants had been exercised at a price equal to $8.10 per share, which led to an increase in Common stock by $134, and Additional paid-in-capital by $1,085,255. .

The fair value of each warrants award is estimated on the date of grant using a Black Scholes Model that uses the item noted in the following table.


Fair value per share (USD/share)	5.94
Exercise price (USD/share)	8.10
Risk free rate	2.74	%
Dividend yield	0.00	%
Expected term/Contractual Life (No. of Yrs)	5.0
Expected volatility	53.0	%

(1) Fair Value of Underlying Common Shares

With reference to Paragraph 17 of SFAS123R, a restricted stock discount was applied to price of the Company’s common shares to reflect the fact that the warrant holders are restricted from exercising the warrant within 180-days after its vesting date. When determining the restricted stock discount, the Black

F-27

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Scholes option model was used. Under the option-pricing method, the cost of put option, which can hedge the price change before the privately held share can be sold, was considered as a basis to determine the discount for lack of marketability. Based on the analysis, restricted stock discount of 12% was applied on the market price of our common share as of the warrant grant dates.

(2) Exercise price

The exercise price of the warrant was determined by the Company’s board of directors.

(3) Risk-free interest rate

Risk-free interest rate was estimated based on the yield to maturity of China international government bonds with a maturity period close to the term of the warrants.

(4) Dividend yield

Dividend yield of 0% was estimated by management of the Company

(5) Life to Expiration

Life to expiration was based on the contractual term of the warrants.

(6) Volatility

The volatility of the underlying common shares during the life of the warrants was estimated based on the historical stock price volatility of listed comparable companies over a period comparable to the expected term of the warrants.

The fair value of warrants on the grant date of September 9, 2009 was $2.37 per share. The total fair value of warrants was $420,675.

The warrants expense for the placement agent was $402,900 as an IPO expense. The warrants expense for the investor relations firm recognized as general and administrative expenses for the year ended December 31, 2009 was $13,831, and another $3,944 will recognize as general and administrative expenses in the next 69 days.

14. Options issued to employees

TRIT’s 2009 employee share option plan that was approved by shareholders permits the Company to offer up to 525,500 shares, options and other securities to its employees. On September 9, 2009, TRIT granted employee 525,500 stock options with an exercise price equal to $6.75 to its senior management and employees. The options will vest based on 5 years of continuous service and will have 10-year contractual terms from September 9, 2009. The options will vest over five years at a rate of 20% per year beginning in September 2010. Certain options provide for accelerated vesting upon a change in control (as defined in the employee share option plan). The company had issued 525,500 stock options on December 31, 2009.

F-28

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

The fair value of each option award is estimated on the date of grant using a Black Scholes Model that uses the item noted in the following table.


Fair value per share (USD/share)	6.75
Exercise price (USD/share)	6.75
Risk free rate	2.74	%
Dividend yield	0.00	%
Expected term/Contractual Life (No. of Yrs)	6.5
Expected volatility	50.0	%

(1) Fair Value of Underlying Common Shares

This is based on market price of the Company’s common shares as of option grant dates.

(2) Exercise price

The exercise price of the options was determined by the Company’s board of directors.

(3) Risk-free interest rate

Risk-free interest rate was estimated based on the yield to maturity of China international government bonds with a maturity period close to the expected term of the options.

(4) Dividend yield

Dividend yield of 0% was estimated by management of the Company.

(5) Expected term

As the Company did not have historical share option exercise experience, it estimated the expected term as the average between the vesting term of the options and the original contractual term.

(6) Volatility

The volatility of the underlying common shares during the life of the options was estimated based on the historical stock price volatility of listed comparable companies over a period comparable to the expected term of the options.

The fair value of options on the grant-date of September 9, 2009 was $3.53 per share. The total fair value of options was $1,855,015. None of options is vested under the employee share option plan as of December 31, 2009.

The Company recognized compensation cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The total option compensation expense recognized for the year ended December 31, 2009 was $114,858, and another $1,740,157 will be recognized as general and administrative expense over the next 1,712 days. $91,480 was recognized as expense for the three months ended March 31, 2010

F-29

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

15. Net Income per Common Share

Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution of securities by adding other common stock equivalents, primarily stock options and warrants, to the weighted-average number of common shares outstanding during the period, if dilutive. Potentially dilutive securities have been excluded from the computation of diluted net income per share if their inclusion is anti-dilutive.

The calculation of basic and diluted net income per common share is as follows (in USD, except per share amounts):


	For the three Months Ended March 31,
	2010		2009
	(Unaudited)		(Unaudited)
Net income attributable to Tri-Tech Holding Inc	$	817,614	$	600,252
Weighted-average shares of common stock used to compute basic net income per share		5,269,011		3,555,000
Effect of dilutive common stock equivalents:
Dilutive effect of warrants		84,349		—
Dilutive effect of employee stock options		205,900		—

Shares used in computing diluted net income per common share		5,559,260		3,555,000


Basic net income per common share	$	0.16	$	0.17

Diluted net income per common share	$	0.15	$	0.17

16. Commitments and Contingencies

Operating Leases

As of March 31, 2010, the Company had commitments under certain operating leases, requiring annual minimum rentals as follows:


2010	$	196,922
2011		134,177
2012		116,921
2013		116,921
2014		107,177

Total	$	672,118

The leased properties are principally located in the PRC and are used for administration and research and development purposes. The terms of these operating leases varied from one to five years. Pursuant to contracts, when the contracts are expired, we have the rights to extended them with new negotiated prices. The leases are renewable subject to negotiation. Rental expenses were $69,227 and $44,333 for the quarters ended March 31, 2010 and March 31, 2009, respectively.

F-30

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Product Warranties

The Company’s warranty policy generally is to replace parts if they become defective within one year after deployment at no additional charge. Historically, failure of product parts due to materials or workmanship has not been significant. The Company has not incurred any material unexpected costs associated with servicing its warranties. The Company continuously evaluates and estimates its potential warranty obligations, and records the related warranty obligation when the estimated amount becomes material at the time revenue is recorded.

17. Certain Significant Risks and Uncertainties

Cash includes cash on hand and demand deposits in accounts maintained with state owned banks within the PRC. Total cash in these banks at March 31, 2010 and December 31, 2009, amounted to $7,202,236 and $8,672,592, respectively, of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company has five major customers which in total represented approximately 68.9% and 61.3% of the Company’s sales for the quarters ended March 31, 2010 and March 31, 2009, respectively. Sales to one customer amounted to $1,572,462 and $414,911 in the segment of Wastewater and Tail Gas Treatment, or accounted for 37.1% and 14.6% of the sales for the first quarter of 2010 and 2009, respectively.

18. Related Party Transactions

To finance the growth of the business, Tranhold borrowed RMB750,000 (equivalent to $102,675) from a shareholder at that time of Tranhold on April 28, 2006, without interest and specific terms. Tranhold repaid RMB650,000 (equivalent to $88,044) to the shareholder in 2008. Outstanding payable balances for this loan were at $14,631 for the years ended December 31, 2008. Tranhold repaid RMB 100,000 (equivalent to $14,631) to the shareholder in March 2009.

F-31

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

An administrative officer of the Company leased his personal property to Tranhold as its branch office in Beijing. The monthly rent is $4,758, which approximates an average of market price, from January 1, 2009 to December 31, 2010.

19. Retirement Plan

The Company and its subsidiaries are required to participate in a central pension scheme operated by the local municipal government. The Company is required to contribute approximately 20% of its payroll costs, subject to certain caps with reference to average municipal salary, to the central pension scheme. The Company charges contributions to its income statement as they become payable in accordance with the rules of the scheme. The aggregate contributions of the Company to retirement benefit schemes amounted to $22,400 and $10,005 for the quarters ended March 31, 2010 and March 31, 2009 respectively.

20. Statutory Reserves

The laws and regulations of the People’s Republic of China provide that before a Chinese enterprise distributes profits to its shareholders, it must first satisfy all tax liabilities, provide for losses in previous years, and make appropriation, in proportions determined at the discretion of the board of directors, to the statutory reserves. The statutory reserves include the surplus reserve fund and the collective welfare fund. These statutory reserves represent restricted retained earnings.

TTII’s subsidiary and VIEs are required to transfer 10% of its net income, as determined in accordance with the PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the Company’s registered capital.

The transfer to this reserve must be made before distribution of any dividend to shareholders. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

As stipulated by the relevant laws and regulations applicable to PRC foreign investment enterprises, the foreign invested PRC subsidiaries are required to make appropriations from net income as determined under PRC GAAP to non-distributable reserves which include a general reserve, an enterprise expansion reserve and an employee welfare and bonus reserve.

Wholly-foreign-owned PRC subsidiaries are not required to make appropriations to the enterprise expansion reserve but appropriations to the general reserve are required to be made at not less than 10% of the profit after tax as determined under PRC GAAP.

The employee welfare and bonus reserve is determined by the Company’s Board of Directors. The general reserve is used to offset future extraordinary losses. The subsidiaries may, upon a resolution passed by

F-32

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

the stockholders, convert the general reserve into capital. The employee welfare and bonus reserve is used for the collective welfare of the employees of the subsidiaries. The enterprise expansion reserve is used for the expansion of the subsidiaries’ operations and can be converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of retained earnings determined according to PRC law.

For the quarters ended March 31, 2010 and December 31, 2009, respectively, the Company made no appropriations to statutory reserves.

21. Segment and Geographic Information

The Company has three reportable operating segments. The segments are grouped with references to the types of services provided and the types of clients that use those services. As TTB and its subsidiaries conduct services of the three segments, the total sales and costs are accordingly divided into the three segmental portions. The Company assesses each segment’s performance based on net revenues and gross profit on contribution margin. The three reportable operating segments are Segment 1: municipal water and wastewater treatment process control systems, process tail gas purification (“Wastewater and Tail Gas Treatment”), Segment 2: water resources protection and allocation, flood control and forecasting, irrigation systems, and municipal water supply and distribution systems (“Water Resource Management”) and Segment 3: Provide systems for VOC abatement and odor control for petrochemical industry (“Industrial Pollution Control”)


	For the quarters ended March 31, 2010 (Unaudited)
	Segment 1 Wastewater and Tail Gas Treatment		Segment 2 Water Resource Management		Segment 3 Industrial Pollution Control		Total
Revenues	$	2,561,051	$	1,616,420	$	60,643	$	4,238,114
Cost of revenues (exclusive of depreciation and amortization expenses shown separately below):		1,531,384		925,391		14,463		2,471,238
Operating expenses:
Depreciation and amortization expenses		21,480		17,481		1,481		40,620
Other operating expenses		404,038		473,814		20,850		898,524
Total operating expenses		425,518		491,295		22,331		939,144
Other income, net		2,194		57,986		—		60,180
Income before income taxes and noncontrolling interest	$	606,343	$	257,720	$	23,849	$	887,912

F-33

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009


	For the quarters Ended March 31, 2009 (Unaudited)
	Segment 1 Wastewater and Tail Gas Treatment		Segment 2 Water Resource Management			Segment 3 Industrial Pollution Control	Total
Revenues	$	1,544,982	$	1,305,825		—	$	2,850,807
Cost of revenues (exclusive of depreciation and amortization expenses which are included in the Operating expenses below):		855,027		926,697		—		1,781,724
Operating expenses:
Depreciation and amortization expenses		8,325		13,258		—		21,583
Other operating expenses		241,990		141,365		—		383,355
Total operating expenses		250,315		154,623		—		404,938
Other income, net		161		(116	)	—		45
Income before income taxes and noncontrolling interest	$	439,801	$	224,389		—	$	664,190

Assets by segment

The Company evaluates its assets by segment to generate information needed for internal control, resource allocation and performance assessment. This information also helps management to establish a basis for asset realization, determine insurance coverage, assess risk exposure, and meet requirements for external financial reporting.

F-34

Tri-Tech Holding Inc. and Subsidiaries

Notes To Consolidated Financial Statements—(Continued)

March 31, 2010 and 2009

Segment assets of the Company are as follows:


	As of March 31, 2010 (Unaudited)
	Segment 1 Wastewater and Tail Gas Treatment		Segment 2 Water Resource Management		Segment 3 Industrial Pollution Control		Total
Segment Assets	$	14,980,100	$	11,546,733	$	361,720	$	26,888,553


	As of December 31, 2009
	Segment 1 Wastewater and Tail Gas Treatment		Segment 2 Water Resource Management		Segment 3 Industrial Pollution Control		Total
Segment Assets	$	10,952,971	$	13,237,317	$	—	$	24,190,288

22. Subsequent Event

On April 20, 2010, the Company announced its offering of 2,142,750 common shares at $14.00 per share. The company has granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of 321,412 additional common shares from the company to cover over-allotments. The company has also agreed to issue the underwriters a warrant to purchase a number of common shares equal to an aggregate of 10% of the common shares sold in the offering, excluding over-allotments, if any. The warrants will have an exercise price equal to 145% of the offering price.

F-35

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