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EX-32.2 - EXHIBIT 32.2 - China TransInfo Technology Corp.exhibit32-2.htm
EX-31.2 - EXHIBIT 31.2 - China TransInfo Technology Corp.exhibit31-2.htm
EX-31.1 - EXHIBIT 31.1 - China TransInfo Technology Corp.exhibit31-1.htm
EX-32.1 - EXHIBIT 32.1 - China TransInfo Technology Corp.exhibit32-1.htm

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

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 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: 001-34134

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

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

9th Floor, Vision Building,
No. 39 Xueyuanlu, Haidian District,
Beijing, China 100191
(Address of principal executive offices, Zip Code)

(86) 10-51691999
(Registrant’s telephone number, including area code)

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

Yes [X]                No [   ]

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

Yes [   ]                No [   ]

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

Large accelerated filer [   ] Accelerated filer                  [   ]
   
Non-accelerated filer   [   ] Smaller reporting company [X]
(Do not check if a smaller reporting company)  

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

Yes [   ]             No [X]

The number of shares outstanding of each of the issuer’s classes of common equity, as of November 12, 2010 is as follows:

Class of Securities Shares Outstanding
Common Stock, $0.001 par value 25,257,569



TABLE OF CONTENTS
 
  PART I – Financial Information Page
     
Item 1. Financial Statements 1
  Condensed Consolidated Balance Sheet-September 30, 2010 and December 31, 2009  
Condensed Consolidated Statement of Income-Three and Nine Months ended September 30, 2010 and September 30, 2009
Condensed Consolidated Statement of Cash Flow-Nine Months ended September 30, 2010 and September 30, 2009
  Notes to condensed Consolidated Financial Statements  
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
     
  PART II – Other Information  
     
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. [Removed and Reserved] 26
Item 5. Other Information 26
Item 6. Exhibits 26

i



PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS            
CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
         
    September 30, 2010     December 31,  
    (Unaudited)     2009  
ASSETS            
Cash and cash equivalents $  21,958,489   $  27,400,420  

Restricted cash

  3,280,080     1,591,076  

Accounts receivable, net of allowance for doubtful accounts of $45,805 and $38,209, respectively

  24,661,107     14,968,778  

Inventories

  541,858     482,286  

Costs and estimated earnings in excess of billings on incomplete contracts

  40,512,371     33,853,708  

Prepaid expenses and other current assets

  19,218,800     5,871,997  

Other receivables

  12,187,681     8,416,096  

Deferred income tax assets

  25,172     28,715  

Total current assets

  122,385,558     92,613,076  

Property and equipment, net

  9,880,633     10,541,486  

Long-term investments

  7,964,665     8,027,122  

Intangible assets, net

  6,877,049     4,494,781  

Goodwill

  10,183,713     9,979,631  

Other assets

  272,051     826,671  

 

           

Total assets

$  157,563,669   $  126,482,767  

 

           

LIABILITIES AND STOCKHOLDERS’ EQUITY

           

 

           

Accounts payable

$  29,574,353   $  20,728,539  

Short-term borrowings from banks

  9,056,850     7,481,700  

Billings in excess of costs and estimated earnings on incomplete contracts

  12,062,019     17,021,936  

Accrued expenses and other current liabilities

  4,368,178     3,022,140  

Total current liabilities

  55,061,400     48,254,315  

Other long-term liabilities

  242,963     389,489  

 

           

Total liabilities

  55,304,363     48,643,804  

Commitments and contingencies

  -     -  

Stockholders’ equity

           

         Preferred stock, $0.001 par value per share, authorized 10,000,000 shares, no shares

           

             issued and outstanding at September 30, 2010 and December 31, 2009

  -     -  

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

           

             and outstanding 25,257,569 and 22,452,745 shares, respectively

  25,258     22,453  

         Additional paid-in capital

  42,994,392     25,253,666  

         Retained earnings

  41,567,843     31,948,323  

         Non-controlling interests

  13,893,931     18,499,475  

         Accumulated other comprehensive income

  3,777,882     2,115,046  

 

           

Total stockholders’ equity

  102,259,306     77,838,963  

 

           

Total liabilities and stockholders’ equity

$  157,563,669   $  126,482,767  


 The accompanying notes are an integral part of the financial statements

1




CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
   
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Net sales $  35,039,549   $  19,165,553   $  83,972,930   $  35,256,869  
Cost of sales   24,470,292     11,809,948     55,288,528     19,896,690  
Gross profit   10,569,257     7,355,605     28,684,402     15,360,179  
Total operating Expenses   5,420,039     3,097,483     15,287,215     6,797,818  
Income from operations   5,149,218     4,258,122     13,397,187     8,562,361  
Non-operating income (expense):                        
     Interest income   23,979     18,909     100,907     51,392  
     Interest expense   (122,747 )   (42,038 )   (326,058 )   (132,027 )
     Subsidy income   673,568     188,829     1,427,592     308,113  
     Other expense, net   (135,633 )   52,433     (210,462 )   59,301  
               Total non-operating income (expenses)   439,167     218,133     991,979     286,779  
Income before income taxes, non-controlling interests, and gain on equity                        
     investments in affiliates   5,588,385     4,476,255     14,389,166     8,849,140  
Income taxes:   608,191     85,864     1,448,014     109,946  
Net income before non-controlling interests and gain on equity investments                        
       in affiliates net income   4,980,194     4,390,391     12,941,152     8,739,194  
Gain (loss) on equity investments in affiliates due to proportional shares of                        
               the affiliates net income   161,597           (139,992 )      
Net income before non-controlling interests   5,141,791     4,390,391     12,801,160     8,739,194  
Non-controlling interests in net income of subsidiary   891,227     415,114     3,181,640     515,588  
Net income $  4,250,564   $  3,975,277   $  9,619,520   $  8,223,606  
Weighted average number of shares of outstanding:                        
       Basic   25,257,569     22,333,000     24,440,253     22,245,288  
       Diluted   25,318,470     22,579,496     24,504,221     22,485,924  
Earnings per share -                        
       Basic $  0.17   $  0.18   $  0.39   $  0.37  
       Diluted $  0.17   $  0.18   $  0.39   $  0.37  
Comprehensive income                        
     Net income including noncontrolling interest $  5,141,791   $  4,390,391   $  12,801,160   $  8,739,194  
     Translation adjustments   1,321,438     (283,124 )   1,662,836     (388,589 )
Comprehensive income $  6,463,229   $  4,107,267   $  14,463,996   $  8,350,605  
     Comprehensive income attributable to noncontrolling interest $  891,227   $  415,114   $  3,181,640   $  515,588  
     Comprehensive income attributable to CTFO $  5,572,002   $  3,692,153   $  11,282,356   $  7,835,017  
                         
The accompanying notes are an integral part of the financial statements    

2



CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES   
Condensed Consolidated Statements of Cash Flows (unaudited)   
    Nine Months Ended September 30,  
    2010     2009  

CASH FLOWS FROM OPERATING ACTIVITIES:

           

     Net income

$  9,619,520   $  8,223,606  

     Adjustments to reconcile net income to net cash provided by operating activities:

           

           Non-controlling interests

  3,181,640     515,588  

           Depreciation and amortization expense

  1,488,333     881,349  

           Stock-based compensation

  1,266,117     181,940  

           Gain on equity investments in affiliates due to proportional shares of the affiliates net income

  139,992     (39,067 )

           Loss on disposal of property and equipment

  (4,587 )   500  

           Allowance for doubtful accounts

  6,696     -  

           (Increase) Decrease in assets:

           

                   Restricted cash

  (1,627,697 )   (35,247 )

                   Accounts receivable

  (9,229,895 )   (1,965,896 )

                   Inventories

  (48,844 )   (255,245 )

                   Prepaid expenses and other current assets

  (13,047,015 )   (169,599 )

                   Other receivables

  (4,040,994 )   (2,058,231 )

                   Cost of estimated earnings in excess of billings on incomplete contracts

  (5,862,734 )   (10,543,333 )

                   Other assets

  561,598     (464,622 )

             Decrease (Increase) in liabilities:

           

                   Accounts payable

  8,276,361     3,788,025  

                   Billings in excess of costs and estimated on incomplete contracts

  (5,215,824 )   (978,605 )

                   Accrued expenses and other current liabilities

  1,638,264     65,252  

Net cash used in operating activities

  (12,899,069 )   (2,853,585 )

 

           

CASH FLOWS FROM INVESTING ACTIVITIES:

           

         Increase in other non-current asset

  -     -  

         Proceeds from disposal of property and equipment

  58,092     1,156  

         Purchases of property and equipment

  (532,380 )   (256,440 )

         Cash from acquisition

  -     12,210,500  

         Purchases of long-term investment

  (735,500 )   -  

         Payments for acquisition of companies

  (259,484 )   (6,984,281 )

         Dividends from subsidiaries’ and variable interest entity

  110,161     -  

         Purchases of intangible assets

  (2,422,365 )   (2,135,841 )

Net cash used in investing activities

  (3,781,476 )   2,835,094  

 

           

CASH FLOWS FROM FINANCING ACTIVITIES:

           

         Proceeds from short-term borrowings

  8,899,550     7,329,500  

         Payments of short-term borrowings

  (7,502,100 )   (2,931,800 )

         Non-controlling interest shareholders’ capital contribution

  -     87,954  

         Proceeds from issuing common shares

  10,000,000        

         Payments to related parties

  -     (454,198 )

         Payments of transaction costs related to shares issuance

  -     (32,500 )

         Payment of dividends from subsidiaries’ and variable interest entity

  -     (1,871,613 )

         Payments for acquiring subsidiary

  -     3,254,298  

         Payments to third parties for stock financing

  (610,549 )   -  

Net cash provided by financing activities

  10,786,901     5,381,641  

Effect of foreign currency translation

  451,713     (359,741 )
Net decrease in cash and cash equivalents   (5,441,931 )   5,003,409  
Cash and cash equivalents – beginning of period   27,400,420     16,122,464  
Cash and cash equivalents – end of period $  21,958,489   $  21,125,873  
             
Supplemental disclosures of cash flow information:            
         Interest paid $  326,058   $  129,839  
         Income taxes paid $  599,848   $  20,367  
             
The accompanying notes are an integral part of the financial statement   

3


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

1.

ORGANIZATION AND BUSINESS OPERATIONS

   

China TransInfo Technology Corp., or CTFO, originally incorporated in Nevada on August 3, 1998, is a provider of end-to-end intelligent transportation comprehensive solutions and traffic information based service in China. Substantially all of the Company’s operations are conducted through its variable interest entities, or VIEs, that are PRC domestic companies owned principally or entirely by the Company’s PRC affiliates. Through these VIEs, the Company is involved in developing multiple applications in transportation, digital city, and land and resource filling systems based on Geographic Information Systems, or GIS, technologies which are used to service the public sector.

   

CTFO and its VIEs are collectively referred to in this report as the "Company."

   

The Company’s primary focus is on providing transportation solutions. The Company’s major products and services include:

  • Transportation Planning Information System,

  • Pavement Maintenance System,

  • Electronic toll collection, or ETC,

  • Traffic Information Service System,

  • Taxi Security Monitoring,

  • Commanding and Dispatching Platform,

  • GIS-T (Transportation) Middleware,

  • Traffic Flow Surveying Systems,

  • Intelligent Parking System,

  • Red Light Violation Snapshot System,

  • Intelligent Highway Vehicle Monitoring System,

  • Intelligent Public Transport System,

  • TransPLE Passenger Flow Statistic,

  • Detecting and Analysis System,

  • Palmcity Navigation Engine,

  • Comprehensive Location Based Service Platform,

  • Digital City, and

  • 2-D and 3-D GIS.

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

4


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   

Principles of Consolidation

   

The condensed consolidated financial statements include the accounts of China TransInfo Technology Corp. and the following direct and indirect wholly owned subsidiaries and VIEs:

   
  Direct Subsidiaries:
  • Oriental Intra-Asia Entertainment (Asia Pacific) Limited,
  • Intra-Asia Entertainment (China) Limited, and Cabowise International Ltd.

Indirect Subsidiary

  • Oriental Intra-Asia Entertainment (China) Limited

VIEs

  • China TransInfo Technology Group Co., Ltd., or the Group Company,
  • Beijing PKU Chinafront High Technology Co., Ltd., or PKU,
  • Beijing Tian Hao Ding Xin Science and Technology Co., Ltd., or Beijing Tian Hao,
  • Beijing Zhangcheng Science and Technology Co., Ltd., or Beijing Zhangcheng,
VIEs (continued)
  • Xinjiang Zhangcheng Science and Technology Co., Ltd., or Xinjiang Zhangcheng,
  • Zhangcheng Culture and Media Co., Ltd., or Zhangcheng Media,
  • China TranWiseway Information Technology Co., Ltd., or China TranWiseway,
  • Dalian Dajian Zhitong Information Service Co., Ltd., or Dajian Zhitong,
  • Shanghai Yootu Information Technology Co., Ltd., or Shanghai Yootu,
  • ChongQing QianFang Industrial Development Ltd., Co., or Chongqing QianFang Industrial,
  • Beijing UNISITS Technology Co., Ltd., or UNISITS,
  • Hangzhou Ziguang Jietong Technology Co., Ltd., or Hangzhou UNISITS,
  • Henan Ziguang Jietong Technology Co., Ltd., or Henan UNISITS, and
  • Beijing Ziguang Jinzhidun Information Technology Co., Ltd., or Beijing UNISITS.
 

All material intercompany accounts, transactions, and profits have been eliminated in consolidation.

The consolidated financial statements include the accounts of the VIEs and the VIEs’ majority owned subsidiaries, which approximate 3% to 70% owned by non-controlling interests.

   

5


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

   
  Principles of Consolidation (continued)
   
 

The accompanying interim unaudited condensed consolidated financial statements, or the Interim Financial Statements, of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these Interim Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. These Interim Financial Statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2009 included in the Company’s Form 10-K for such fiscal year. In the opinion of management, the Interim Financial Statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented. The operating results and cash flows of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

   

Use of Estimates

   

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

   

Reclassification

   

The presentation of certain line items presented on the consolidated statements of cash flows for the prior years have been reclassified in conformity with the current year presentation of the condensed consolidated financial statements and the corresponding notes. For comparative purposes, in the financial statements for the nine months ended September 30, 2009, the Company reclassified the following:

  • Reduced operating cash flows and increased investing cash flows by $291,622 related to changes in non-current assets.

  • Reduced operating cash flows and increased financing cash flows by $190,567 related to changes in customer deposit.

  • Reduced investing cash flows and increased financing cash flows by $3,951,779 related to the purchase of UNISITS.

The reclassification had no effect on the Company’s previously reported condensed consolidated statements of income, balance sheet or consolidated statements of stockholders’ equity, and is not considered material to any previously reported condensed consolidated financial statements.

Research and Development

Research and development expenses include payroll, employee benefits, and other headcount-related expenses associated with product development. Such costs related to product development costs are included in research and development expense until the point that technological feasibility is reached, which for the Company's products, is generally shortly before the products are released for their commercial use. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. The Company capitalized $4,191,761 and $2,676,054 of research and development expenses as of September 30, 2010 and December 31, 2009, respectively, which were included in the intangible assets in the Company's condensed consolidated balance sheets.

6


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

   
 

Revenue Recognition

The Company recognizes revenue in accordance with ASC 605, Revenue Recognition, when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered.

The Company’s revenue of service fees are primarily fixed price contracts. Revenue on eligible fixed price contracts is recognized on the basis of the estimated percentage-of-completion within the scope of ASC 605 and is consistently applied for all fixed price contracts. Such contracts include services provided for software development projects, IT outsourcing and solutions, system integration, and network integration services at fixed price arrangements with its customers. Progress towards completion is typically measured based on achievement of specified contract milestones, or other measures of progress when available, or based on costs incurred as a proportion of estimated total costs. Profit in a given period is reported at the expected profit margin to be achieved on the overall contract. This method can result in the recognition of unbilled receivables or the deferral of costs or profit on these contracts. The Company did not incur any deferred costs for the quarter ended September 30, 2010 and 2009. Management regularly reviews project profitability and underlying estimates. Revisions to the estimates at completion are reflected in results of operations as a change in accounting estimate in the period in which the facts that give rise to the revision become known by management. Provisions for estimated losses, if any, are recognized in the period in which the loss becomes evident. The provision includes estimated costs in excess of estimated revenue and any profit margin previously recognized. Any advance payments received from its customers prior to recognition of revenue is classified as a current liability as billings in excess of costs and estimated earnings on incomplete contracts.

For taxi media advertising revenue, the Company recognizes deferred revenue when cash is received, but the revenue has not yet been earned. The Company recognizes taxi media advertising revenue ratably over the period in which the advertisement is published.

Fair Value Measurements

The carrying value of cash, accounts receivable, other current liabilities, accounts payable, accrued expenses and other current liabilities approximate the fair values of these instruments due to their short-term nature.

Income Taxes

The Company adopted ASC 740-10-25 on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

7


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

   

Recently Issued Accounting Guidance

   

In April 2010, the Financial Accounting Standards Board, or FASB, issued an Accounting Standard Update, or ASU, No.2010-13,"Compensation-Stock Compensation" (Topic 718):Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades," which address the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. ASU 2010-13 is effective for interim and annual periods beginning on or after December 15, 2010 and is not expected to have a material impact on the Company’s consolidated financial position or results of the operations.

   

In April 2010, the FASB issued an ASU No. 2010-17, "Revenue Recognition – Milestone Method (Topic 605), which provides guidance on defining milestones under Topic 605 and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development deliverables in an arrangement in which one or more payments are contingent upon achieving uncertain future events or circumstances. ASU 2010-17 shall be applied prospectively to milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010 and is not expected to have a material impact on the Company’s consolidated financial position or results of operation.

   

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

   
3.

COSTS AND ESTIMATED EARNINGS ON INCOMPLETE CONTRACTS

   

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

   
    September 30,        
    2010     December 31,  
    (Unaudited)     2009  
Costs incurred on incomplete contracts $  122,811,212   $  85,079,704  
Estimated earnings on incomplete contracts   63,880,843     43,918,724  
Total   186,692,055     128,998,428  
Less – billings to date   (158,241,703 )   (112,166,656 )
Costs and estimated earnings on incomplete contracts, net of billings in excess of costs and estimated earnings on incomplete contracts $ 28,450,352 $ 16,831,772
 
8


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

3. COSTS AND ESTIMATED EARNINGS ON INCOMPLETE CONTRACTS (continued)

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

    September 30,        
    2010     December 31,  
    (Unaudited)     2009  
Costs incurred on estimated earnings in excess of billings on incomplete contracts $  40,512,371   $  33,853,708  
Billings in excess of costs and estimated earnings on incomplete contracts   (12,062,019 )   (17,021,936 )
Total $  28,450,352   $  16,831,772  
   
4. NON-CONTROLLING INTERESTS

Non-controlling interests consisted of the following:

                      Adjustments/Net              
    % of Non-     As of     2009     Income           As of  
    controlling     December 31,     Acquisition     of Non-controlling           December  
     Name of Affiliate   Interest     2008     (Fair Value)     Interest     Dividends     31, 2009  
PKU   3%   $  1,188,662   $  -   $  247,525   $  -   $  1,436,187  
China TranWiseway   30%     286,224     -     (1,498 )   -     284,726  
Dajian Zhitong   15%     (9,143 )   -     42,419     -     33,276  
UNISITS   64.83%     -     13,740,228     3,005,058           16,745,286  
Total       $  1,465,743   $  13,740,228   $  3,293,504         $  18,499,475  
                                     
                                     
                      Adjustments/Net              
    % of Non-     As of     2010     Income           As of  
    controlling     December 31,     Acquisition     of Non-controlling           September  
     Name of Affiliate   Interest     2009     (Fair Value)     Interest     Dividends     30, 2010  
PKU   3%   $  1,436,187   $  -   $  195,606   $  -   $  1,631,793  
China TranWiseway   30%     284,726     -     238,168     -     522,894  
Dajian Zhitong   15%     33,276     -     (31,295 )   -     1,981  
UNISITS   33.98%     16,745,286     (7,734,789 )   2,779,161     (52,395 )   11,737,263  
Total       $  18,499,475   $  (7,734,789 ) $  3,181,640   $  (52,395 ) $  13,893,931  

9


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

4. NON-CONTROLLING INTERESTS (Continued)

On March 22, 2010, CTFO and the Group Company entered into equity transfer agreements, or Equity Transfer Agreements, with several individual shareholders, or Transferors, of UNISITS, pursuant to which the Group Company acquired 30.85% equity interest in UNISITS from the Transferors. Pursuant to the Equity Transfer Agreements, the Group Company purchased approximately 16.23 million shares of UNISITS from the Transferors in exchange for RMB 4.41 million (approximately $0.65 million) in cash, or the Cash Consideration, 40% of which is payable within seven days after the effective date of the Equity Transfer Agreements, and approximately 1.16 million shares of CTFO common stock, which are issuable within 30 days of the effective date of the Equity Transfer Agreements. The Equity Transfer Agreements contain "make good" provisions, under which the Transferors agree to deposit a total of 697,162 shares (60% of total common stock consideration) of the CTFO common stock with an escrow agent designated by CTFO that the Transferors will receive as partial consideration for the acquisition. Specifically, if UNISITS’s 2010 after-tax net income under Chinese GAAP is less than RMB 37.50 million (approximately US$5.50 million) or its 2011 after-tax net income under Chinese GAAP is less than RMB 46.88 million (approximately US$6.86 million), then 50% of the shares of the CTFO common stock deposited by the Transferors in escrow will be returned to CTFO for cancellation for each applicable year. In addition, for each applicable year as described above, CTFO will not be required to pay the remainder of the Cash Consideration, which represents RMB 1.323 million (approximately US$0.19 million), or 30% of the total Cash Consideration, per year if UNISITS fails to meet the respective performance targets.

Since September 8, 2009, the date that Mr. Shudong Xia acquired 35.17% of the equity interest in UNISITS, the Company has consolidated the financial statements of UNISITS. As part of this acquisition, the Group Company and four of five members of the board of directors of UNISITS entered into an Acting in Concert Agreement, pursuant to which the Group Company has the right to make decisions on the financial and operating policies of UNISITS and therefore to obtain the control of UNISITS. As a result, UNISITS became a variable interest entity of the Group Company and UNISITS’s financial statements have been included in the Company’s consolidated financial statements since September 8, 2009 in accordance with ASC 810-10-15-3, Consolidation of Entities through Majority of Voting Interest.

The Group Company’s 30.85% equity interest purchase has been accounted in accordance with ASC 810-10-45-23. Accordingly, the Group Company’s purchase of additional equity interest ownership in UNISITS’s interest while the Group Company retains its controlling financial interest in UNISITS has been accounted for as equity transactions (investments by owners and distributions to owners acting in their capacity as owners). Therefore, no gain or loss has been recognized in consolidated net income or comprehensive income. The carrying amount of the non-controlling interest has been adjusted to reflect the change in its ownership interest in the subsidiary (UNISITS). Any difference between the fair value of the consideration received or paid and the amount by which the non-controlling interest is adjusted has been recognized in equity attributable to the Group.

10


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

5. LONG-TERM INVESTMENTS

The Company had the following long-term investments accounted under the equity method and cost method :

    September
    30, 2010
Type Invested Entity Equity
    Investment
    Ownership
Equity GanSu Ziguang Intelligent Transportation and Control, or Gansu 33.33%
Equity ShanXi Ziguang Trans Technology Co., Ltd., or Shanxi 49.00%
Equity Beijing Chinacommunications UNISPlendour TECHNOLOGY Co., or ZJUNIS 30.00%
Equity Beijing Optic Times Technology Co., Ltd., or BOTTC 23.17%
Equity ChongQing JiaoKai Information Technology Co., Ltd., or CQJK 49.00%
Cost ShanDong Hi-speed Information Engineering Co., Ltd., or Shandong 5.00%
Cost BeiJing Ziguang Youma Technology Co., Ltd., or ZGYM 15.00%
Cost ChongQing QianFang Industrial Development Ltd., or CQQF 10.00%

Equity and cost investments in affiliates as of September 30, 2010 consisted of the following:

Type   Invested Entity     Beginning Equity Investment Basis 12/31/2009     Purchase of Investments     Proportional Share of the Equity- Accounted
Affiliate’s Net Income
    Dividends     Foreign Currency
Translation Adjustment
    Ending Equity Investment
Basis 9/30/2010
 
Equity   Gansu   $  7,261,227           77,616     (698,530 )   149,863     6,790,176  
Equity   Shanxi     204,971           (6,890 )   (22,006 )   4,070     180,145  
Equity   ZJUNIS     207,168           (148,688 )   (60,089 )   1609        
Equity   BOTTC     185,784           (62,030 )   (52,019 )   2,703     74,438  
Equity   CQJK     35,942                       734     36,676  
Cost   Shandong     110,025                       2,250     112,275  
Cost   ZGYM     22,005                       450     22,455  
Cost   CQQF           748,500                       748,500  
Total       $  8,027,122     748,500     (139,992 )   (832,644 )

$

161,679     7,964,665  

As of September 30, 2010, the Company had received dividends approximately $112,000, and approximately $721,000 of the balance of dividends receivable had not been received.

11


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

6. STOCK-BASED COMPENSATION

Stock Warrants

On November 30, 2007, the Company issued warrants to CCG Investor Relations Partners LLC, or CCG, to purchase 50,000 shares of the Company’s common stock in exchange for CCG’s investor relations services, with an exercise price of $5.00 per share. These warrants will expire on November 29, 2010. The fair market value of these warrants was $200,105 and recorded as an increase in Selling, General, and Administrative expenses and Additional Paid-in Capital at the date of grant. The fair market value was estimated on the date of grant using the Black-Scholes option-pricing model in accordance with ASC 718, Compensation-Stock Compensation, using the following assumptions: expected dividend yield 0%, risk-free interest rate of 3.08%, volatility of 148%, and an expected term of three years. As of September 30, 2010, all of the warrants had been exercised.

A summary of stock warrants for the quarter ended September 30, 2010 is as follows:

                  Weighted-Average        
            Weighted-     Remaining     Aggregate  
            Average     Contractual Term     Intrinsic  
Warrants     Shares     Exercise Price     (Months)     Value  
Outstanding at January 1, 2010     55,555   $  1.80     52     353,885  
Granted     -     -     -        
Exercised or converted     50,000     1.80     -        
Forfeited or expired     -     -     -        
Outstanding at September 30, 2010     5,555   $  1.80     43   $  25,386  
Exercisable at September 30, 2010     5,555   $  1.80     43   $  25,386  

Stock Options

The Company issued the following stock options:

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

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

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

12


CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

6.

STOCK-BASED COMPENSATION (Continued)

       
  •  
  • On April 29, 2009, the Board of Directors adopted the 2009 Equity Incentive Plan, or the Plan, which was subsequently approved by shareholders at the Company’s 2009 Annual Shareholder Meeting on May 29, 2009. Under the Plan, the Company issued the following stock options:

           
    • On June 1, 2009, the Board granted an employee 30,000 stock options with an exercise price of $5.09, which was the closing price per share of the Company’s common stock as reported on the NASDAQ Stock Market on such date. The options have a term of five years and expire on June 1, 2014. The options vest in equal installments on a semi-annual basis over a three-year period. On the same date, the Board of Directors voted to adjust the exercise prices of the stock options which were granted on May 1, 2008 and September 28, 2008 to Messrs Trien, Chen and Lin to $5.09 per share and replaced the stock options granted on January 7, 2008 to Mr. Mao with 150,000 shares of restricted stocks. The incremental compensation cost of the re-priced options and replaced restricted stocks was $27,000, with totaling $8,507 recognized as compensation cost at the date of re-pricing.

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

  •  
  • On June 14, 2010, the Company entered into a Stock Option Agreement with Mr. Xingming Zhang. Under the terms of the Stock Option Agreement, the Company agreed to grant a stock option to Mr. Zhang for the purchase of 30,000 shares of common stock of the Company at an exercise price of $6.03 per share which was the closing price per share of the Company’s common stock as reported on the NASDAQ on such date. The option has a term of five years and expires on June 14, 2015. The option vests in equal installments on a quarterly basis over a three-year period.

           

    The Company recorded compensation expense of $1,266,117 and $181,940 during the nine months ended September 30, 2010 and 2009, respectively, in connection with the stock options provided above.

           

    The Company estimated fair value of stock options using a Black-Scholes option pricing valuation model, consistent with the provisions of ASC 718, Compensation- Stock Compensation. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of the Company’s stock, the risk-free rate and the Company’s dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by grantees, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company.

    13


    CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

    Notes to Unaudited Condensed Consolidated Financial Statements

    6.

    STOCK-BASED COMPENSATION (Continued)

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

        Nine months ended     Year ended December  
        September 30, 2010     31, 2009  
    Risk-free interest rate   1.4%     1.50% - 1.65%  
    Expected life (year)   3.5     3.5 – 4.5  
    Expected volatility   49%     65% - 82%  
    Weighted average fair value per option $ 2.2   $ 3.16  

    A summary of stock options transactions during the nine months ended September 30, 2010 is as follows:

                    Weighted-Average        
              Weighted-     Remaining     Aggregate  
              Average     Contractual Term     Intrinsic  
      Stock Options   Shares     Exercise Price     (Months)     Value  
    Outstanding at January 1, 2010   2,025,600   $  7.50     45     2,437,788  
    Granted   30,000     6.03     36        
    Exercised or converted   -     -     -        
    Forfeited or expired   (54,000 )   7.69     -        
    Outstanding at September 30, 2010   2,001,600   $  7.49     48   $  1,119,300  
    Non-vested at September 30, 2010   1,794,100   $  7.57     49   $  219,800  
    Exercisable at September 30, 2010   207,500   $  5.12     35   $  899,500  

    The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $6.37 and $8.17 as of September 30, 2010 and December 31, 2009, respectively, which would have been received by the option holders had all warrant holders exercised their warrant awards as of that date. No options were exercised during the nine months ended September 30, 2010.

    The following table details the Company’s non-vested share awards activity:

              Weighted-  
              Average Grant-  
        Shares     Date Fair Value  
    Balance at December 31, 2009   1,883,100   $  7.51  
    Granted   30,000     6.03  
    Vested   (65,000 )   5.09  
    Cancelled or Forfeited   (54,000 )   7.69  
    Balance at September 30, 2010   1,794,100   $  7.57  

    The weighted-average grant-date fair value of non-vested share awards is the quoted market value of the Company’s common stock on the date of grant, as shown in the table above. As of September 30, 2010, total unrecognized compensation costs related to unvested stock options was approximately $4,551,000. Unvested stock options are expected to be recognized over a weighted average period of 3.05 years.

    14


    CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

    Notes to Unaudited Condensed Consolidated Financial Statements

    7.

    EQUITY TRANSACTIONS

       

    On February 21, 2010, the Company entered into a Securities Purchase Agreement with SAIF Partners III L.P., pursuant to which the Company sold a total of 1,564,945 shares of common stock, par value $0.001 per share for an aggregate purchase price of $10,000,000. The shares were priced at $6.39 per share.

       

    On April 14, 2010, the Company issued a total of 1,161,931 shares of common stock pursuant to the Equity Transfer Agreements entered with the Transferors of UNISITS on March 22, 2010. There were 464,769 shares, which is 40% of the total shares issued to the Transferors were delivered to the Transferors and the remaining 697,162 shares were held in escrow according to the Equity Transfer Agreements.

       
    8.

    INCOME TAXES

       

    The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, the Company recognized no increases or decreases in the total amounts of previously unrecognized tax benefits. The Company had no unrecognized tax benefits as of September 30, 2010 and 2009. The Company did not incur any interest and penalties related to potential underpaid income tax expenses and also believed that the adoption of FIN 48 does not have a significant impact on the unrecognized tax benefits during the nine months ended September 30, 2010.

       

    The Company, through its subsidiaries, is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred net accumulated operating losses of approximately $15,000,000 as of September 30, 2010 for income tax purposes. However, a hundred percent allowance has been created on the deferred tax asset of approximately $4,600,000 due to uncertainty of its realization.

       

    For the nine months ended September 30, 2010 and 2009, income tax expenses were as follows:


    Nine Months Ended September 30,
      2010   2009  
                                                    Domestic     Foreign     Domestic     Foreign  
                                     Federal     State     China     Federal     State     China  
    Current         1,443,956             $ 109,946  
    Deferred             4,058                    
        $       1,448,014                 109,946  

    The Group Company, Zhangcheng Media, Xinjiang Zhangcheng, and Dajian Zhitong are subject to a tax rate of 25% on the taxable net income for PRC income tax purposes under the new Enterprise Tax Law in 2009. PKU, China TranWiseway, UNISITS, Beijing UNISITS, and Hangzhou UNISITS are subject to a tax rate of 15% on the taxable net income for PRC income tax purposes in 2010. Beijing Tian Hao, Beijing Zhangcheng and Shanghai Yootu qualify as “new or high-technology enterprise” located in High-Tech Zones in Beijing and Shanghai, respectively, and are entitled to tax exemptions or preferential tax rates on the taxable net income for PRC income tax purposes in 2010. Henan UNISITS is subject to a special rate of 2.5% of its taxable income in 2010.

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

    The tax effects of existing temporary differences that give rise to significant portions of deferred tax assets at September 30, 2010 and December 31, 2009 were as follows:

    15


    CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

    Notes to Unaudited Condensed Consolidated Financial Statements

    8. INCOME TAXES (Continued)      
        Deferred Tax Assets
        Net operating loss Valuation Net deferred tax
        carryforwards allowance assets
      September 30, 2010:                    
      Foreign:      
      In RMB   ¥  168,151   ¥  -   ¥  168,151  
      Exchange rate 0.1497 0.1497  
      In USD   $  25,172   $  -   $  25,172  
      Domestic :      
      In USD   $  4,600,000   $  (4,600,000 ) $  -  
      December 31, 2009:      
      Foreign:                    
      In RMB ¥  195,740 ¥  - ¥  195,740
      Exchange rate     0.1467     0.1467        
      In USD $  28,715 $  - $  28,715
      Domestic :                    
      In USD $  4,600,000 $  (4,600,000 ) $  -
                           
    9. EARNINGS PER SHARE                    

    The Company calculates its basic and diluted earnings per share in accordance with ASC 260, Earnings per Share. Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and stock options include non-vested stock granted to employees.

        Three Months Ended September 30,     Nine Months Ended September 30,  
        2010     2009     2010     2009  
     Net income attributable to CTFO $  4,250,564   $  3,975,277   $  9,619,520   $  8,223,606  
     Basic earnings per share:                        
                             
     Basic weighted average share outstanding   25,257,569     22,333,000     24,440,253     22,245,288  
     Basic earnings per common share $  0.17   $  0.18   $  0.39   $  0.37  
                             
     Diluted earnings per share:                        
     Basic weighted average share outstanding   25,257,569     22,333,000     24,440,253     22,245,288  
     Effect of dilutive stock options and warrants   60,901     246,496     63,968     240,636  
                             
     Diluted weighted average shares outstanding   25,318,470     22,579,496     24,504,221     22,485,924  
     Diluted earnings per common share $  0.17   $  0.18   $  0.39   $  0.37  

    16


    CHINA TRANSINFO TECHNOLOGY CORP. AND SUBSIDIARIES

    Notes to Unaudited Condensed Consolidated Financial Statements

    10.

    CONCENTRATION OF RISK

       

    Cash

       

    The Company maintains cash in US dollar in two commercial banks located in California. Up to $250,000 of the balance in each bank was insured by the U.S. Federal Deposit Insurance Corporation (FDIC). As of September 30, 2010 and December 31, 2009, uninsured balances totaled $594,518 and $1,901,266, respectively.

       

    Major Customers

       

    The Company had one and nil major customers that each represented 10% or more of the Company’s total net sales during the nine months ended September 30, 2010 and 2009, respectively. Total net sales was $8,670,966 for the nine months ended September 30, 2010, and related accounts receivable balance was $1,914,529 as of September 30, 2010 .

       
    11.

    SUBSEQUENT EVENTS

       

    On October 19, 2010, the Group Company entered into a registered capital contribution agreement with Beijing Shiji Yingli Science and Technology Co., Ltd., or Shiji Yingli, whereby Shiji Yingli agreed, to contribute RMB 9.6 million (approximately $1.4 million) in cash and RMB 44.6 million (approximately $6.6 million) in intangible assets (mostly technology and intellectual property owned by Shiji Yingli) into the Group Company’s wholly owned subsidiary, Beijing Zhangcheng, in exchange for a 49% equity interest in Beijing Zhangcheng. Following this transaction, the Group Company will retain a 51% majority ownership of Beijing Zhangcheng while Shiji Yingli will own the remaining 49% equity interest.

    On October 21, 2010, the Group Company entered into a registered capital contribution agreement with Beijing Marine Communication & Information Co., Ltd., or Beijing Marine, and Zhongyuan Credit Guarantee Co., Ltd., or Zhongyuan Credit, whereby Zhongyuan Credit agreed, to contribute RMB 30 million (approximately $4.38 million) in cash into the Group Company’s majority-owned subsidiary, China TranWiseway in exchange for a 30% equity interest in China TranWiseway. Following this transaction, the Group Company will retain a 55% majority ownership of China TranWiseway while Beijing Marine and Zhongyuan Credit will own 15% and 30% equity interest in China TranWiseway, respectively.

    The Company has evaluated subsequent events through the date the financial statements were issued. Management does not believe there were any other subsequent events have occurred that would require further disclosure or adjustment to the financial statements.

    17


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

    Special Note Regarding Forward Looking Statements

    This Quarterly Report on Form 10-Q, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that are based on the beliefs of our management, and involve risks and uncertainties, as well as assumptions, that, if they ever materialize or prove incorrect, could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,” “aim,” “will” or similar expressions are intended to identify forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; and any statements of belief or intention. As such, they are subject to risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward looking statements. Such risks and uncertainties include any of the factors and risks mentioned in the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent SEC filings, and any statements of assumptions underlying any of the foregoing. All forward-looking statements included in this report are based on information available to us on the date of this report. We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

    Certain Terms

    Except where the context otherwise requires and for the purposes of this report only:

    • “BVI” refers to the British Virgin Islands;

    • “China,” “Chinese” and “PRC” refer to the People’s Republic of China and do not include Taiwan and special administrative regions of Hong Kong and Macao;

    • “China TransInfo,” “the Company,” “we,” “us,” and “our” refer to China TransInfo Technology Corp., its subsidiaries, and, in the context of describing our operations and business, and consolidated financial information, include our VIE Entities;

    • “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

    • “RMB” refers to Renminbi, the legal currency of China;

    • “SEC” refers to the United States Securities and Exchange Commission;

    • “Securities Act” refers to the Securities Act of 1933, as amended;

    • “U.S. dollar,” “$” and “US$” refer to the legal currency of the United States; and

    • “VIE Entities” means our consolidated variable interest entities, including China TransInfo Technology Group Co., Ltd. and its subsidiaries as depicted in our organization chart included in our Annual Report on Form 10-K for the year ended December 31, 2009.

    The following discussion and analysis of our financial condition and results of operations includes information with respect to our plans and strategies for our business and should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included herein and our consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Form 10-K for the year ended December 31, 2009.

    18


    Overview of Our Business

    We are a leading provider of end-to-end intelligent transportation comprehensive solutions and traffic information based service in China. Our goal is to become the largest provider of transportation information products and related comprehensive technology solutions in China, as well as the largest Chinese operator and provider of real-time transportation information to consumers. Substantially all of our operations are conducted through our VIE Entities that are PRC domestic companies owned principally or entirely by our PRC affiliates. Through our VIE Entities, we are involved in developing multiple applications in transportation, digital city, and land and resource filling systems based on Geographic Information Systems, or GIS, technologies which are used to service the public sector.

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

    • Transportation Planning Information System,

    • Pavement Maintenance System,

    • Electronic toll collection, or ETC,

    • Traffic Information Service System,

    • Taxi Security Monitoring,

    • Commanding and Dispatching Platform,

    • GIS-T (Transportation) Middleware,

    • Traffic Flow Surveying Systems,

    • Intelligent Parking System,

    • Red Light Violation Snapshot System,

    • Intelligent Highway Vehicle Monitoring System,

    • Intelligent Public Transport System,

    • TransPLE Passenger Flow Statistic,

    • Detecting and Analysis System,

    • Palmcity Navigation Engine,

    • Comprehensive Location Based Service Platform,

    • Digital City, and

    • 2-D and 3-D GIS.

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

    Third Quarter Financial Performance Highlights

    We continued to experience strong demand for our products and services during the third quarter of 2010, which resulted in continued growth in our revenues. The transportation information industry in China is in the process of rapid and continuous development with a continuous increase of the Chinese government’s and public’s demand for advanced transportation information products and services to support more effective and efficient transportation networks in China. This trend is supported by the growing amount of governmental spending in the transportation sector. We believe this trend will continue to result in the growth in sales of our transportation products and services.

    The following are some financial highlights for the third quarter of 2010:

    • Net sales – Our net sales were approximately $35.04 million for the third quarter of 2010, an increase of 82.83% from the same quarter of prior year.

    • Gross Margin – Gross margin was 30.16% for the third quarter of 2010, as compared to 38.38% for the same period in 2009.

    • Operating Profit – Operating profit was approximately $5.15 million for the third quarter of 2010, an increase of 20.93% from $4.26 million of the same quarter of prior year.

    • Net Income – Net income was approximately $4.25 million for the third quarter of 2010, an increase of 6.93% from the same quarter of prior year.

    19


    Critical Accounting Estimates

    As discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, we consider our estimates on revenue recognition, vendor allowances, amortization of intangibles, and inventory valuation to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements. There have been no significant changes to these estimates in the three months ended September 30, 2010.

    Recently Issued Accounting Guidance

    See Note 2 to condensed consolidated financial statements included in Item 1, Financial Information, of this Quarterly Report on Form 10-Q.

    Recent Development

    On October 31, 2010, Mr. Zhihai Mao resigned as our Chief Financial Officer, effective immediately. Mr. Mao's resignation was not in connection with any known disagreement with us on any matter. As a result of the resignation of Mr. Mao, his employment agreement with us, dated November 27, 2007, and the restricted shares grant agreement with us, dated June 1, 2010, were terminated, effective on October 31, 2010. On the same date, our Board of Directors appointed Ms. Danxia Huang, our Vice President of Operations and Director, to serve as our Interim Chief Financial Officer, effective immediately upon Mr. Mao's resignation, until a successor is named. Mr. Mao will serve as our consultant during this transition period. Please see our Current Report on Form 8-K filed with the SEC on November 4, 2010 for more information.

    RESULTS OF OPERATIONS

    Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

    The following table sets forth selected items from our unaudited condensed consolidated statements of income by dollar and as a percentage of our net sales for the periods indicated:

     

      Three Months Ended     Three Months Ended  

     

      September 30, 2010     September 30, 2009  

     

            % of           % of  

     

      Amount     Net Sales     Amount     Net Sales  

    Net sales

    $  35,039,549     100.00%   $  19,165,553     100.00%  

    Cost of sales

      24,470,292     69.84%     11,809,948     61.62%  

    Gross profit

      10,569,257     30.16%     7,355,605     38.38%  

    Selling, general and administrative expenses

      5,420,039     15.47%     3,097,483     16.16%  

    Income from operations

      5,149,218     14.70%     4,258,122     22.22%  

    Non-operating income (expense)

      439,167     1.25%     218,133     1.14 %  

    Income before income taxes, non-controlling interests, and gain on equity investment in affiliates

      5,588,385     15.95%     4,476,255     23.36%  

    Income taxes

      608,191     1.74%     85,864     0.45%  

    Net income before non-controlling interests and gain on equity investments in affiliates net income

      4,980,194     14.21%     4,390,391     22.91%  

    Gain on equity investments in affiliates due to proportional shares of the affiliates net income

      161,597     0.46%     -     -  

    Net income before non-controlling interests

      5,141791     14.67%     4,390,391     22.91%  

    Non-controlling interests in net income of subsidiary

      891,227     2.54%     415,114     2.17%  

    Net income

    $  4,250,564     12.13%   $  3,975,277     20.74%  

    Net Sales – Our net sales are generated from sales of our products. Net sales increased by $15.88 million, or 82.83%, to $35.04 million for the three months ended September 30, 2010, from $19.17 million during the same period of 2009. Approximately 79.09% of this increase is attributable to the increase in transportation revenue mainly resulted from our expanded business as a result of the acquisition of Beijing UNISITS Technology Co. Ltd., or UNISITS and accordingly, the consolidation of UNISITS financial results. UNISITS contributed approximately $21.77 million sales during the three months ended September 30, 2010 as compared to $7.85 million during the same period of 2009.

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

    20



     

    Three Months  Ended
    September 30, 2010

      Three Months Ended
    September 30, 2009
      
     
              % of Net           % of Net  
       

      Net Sales

        Sales     Net Sales     Sales  
    Transportation $ 29,936,621     85.44%   $  17,385,968     90.71%  
    Digital City   2,107,790     6.02%     778,009     4.06%  
    Land and resources   2,186,190     6.24%     984,527     5.14%  
    Other   808,947     2.31%     17,049     0.09%  
    Net sales $ 35,039,549     100.00%   $  19,165,553     100.00%  

    Gross Profit – Our gross profit is equal to the difference between our revenues and cost of sales. Our gross profit increased approximately $3.21 million, or 43.69%, to approximately $10.57 million for the three months ended September 30, 2010, from approximately $7.36 million during the same period of 2009. Gross profit as a percentage of net sales was 30.16% for the three months ended September 30, 2010, a decrease of 8.22% from 38.38% during the same period of 2009. Our gross profit increase was mainly attributable to the increase of sales during the three months ended September 30, 2010 in general. However, our gross profit increase underperformed our revenue increase from the same period of 2009 to 2010 by about 39.26%, which was mainly due to the inclusion of the financials of UNISITS whose sales generally involve more hardware components and have much lower margin than our legacy business during the three months ended September 30, 2010.

    Selling, General and Administrative Expenses – Selling, general and administrative expenses increased by $2.32 million, or 74.98%, to $5.42 million for the three months ended September 30, 2010, from $3.10 million during the same period of 2009. The increase is due to the following:

    • Our selling expenses including sales representative commissions, promotion fees and marketing expenses, increased approximately $0.07 million, or 12.50%, to $0.63 million for the three months ended September 30, 2010, from $0.56 million during the same period of 2009. As a percentage of revenues, selling expenses decreased to 1.79% for the three months ended September 30, 2010, from 2.93% during the same period of 2009. The increase of selling expenses was mainly attributable to our expanded operations and increased sales volume as well as the enhanced marketing activities for the three months ended September 30, 2010.

    • Our general and administrative expenses were approximately $4.79 million (13.68% of total sales) and approximately $2.54 million (13.23% of total sales) for the three months ended September 30, 2010 and 2009, respectively. The increase of administrative expenses was mainly attributable to the increase of staffing, enhanced research and development efforts as well as more professional expenses associated with being a public company.

    Income Taxes – For the three months ended September 30, 2010, we recognized income tax expense of $0.61 million and effective tax rate of 10.88% while in the same period of 2009, we recognized income tax benefits of $0.09 million and effective tax rate of 1.92% . The increase in the income tax expense mainly resulted from the increased taxable income of UNISITS during the three months ended September 30, 2010.

    Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

    The following table sets forth selected items from our unaudited condensed consolidated statements of income by dollar and as a percentage of our net sales for the periods indicated:

     

      Nine Months Ended     Nine Months Ended  

     

      September 30, 2010     September 30, 2009  

     

            % of           % of  

     

      Amount     Net Sales     Amount     Net Sales  

    Net sales

    $  83,972,930     100.00%   $  35,256,869     100.00%  

    Cost of sales

      55,288,528     65.84%     19,896,690     56.43%  

    Gross profit

      28,684,402     34.16%     15,360,179     43.57%  

    Selling, general and administrative expenses

      15,287,215     18.20%     6,797,818     19.28 %  

    Income from operations

      13,397,187     15.96%     8,562,361     24.29%  

    Non-operating income (expense)

      991,979     1.18%     286,779     0.81 %  

    Income before income taxes, non-controlling interests, and gain on equity investment in affiliates

      14,389,166     17.14%     8,849,140     25.10%  

    Income taxes

      1,448,014     1.72%     109,946     0.31%  

    Net income before non-controlling interests and gain on equity investments in affiliates

      12,941,152     15.42%     8,739,194     24.79%  

    Loss on equity investments in affiliates due to proportional shares of the affiliates net income

      (139,992 )   (0.17% )   -     -  

    Net income before non-controlling interests

      12,801,160     15.25%     8,739,194     24.79%  

    Non-controlling interests in net income of subsidiary

      3,181,640     3.79%     515,588     1.46%  

    Net income

    $  9,619,520     11.46%   $  8,223,606     23.33%  

    21



    Net Sales – Net sales increased by $48.71 million, or 138.17%, to $83.97 million for the nine months ended September 30, 2010, from $35.26 million during the same period of 2009. Approximately 99.21% of this increase is attributable to the increase in transportation revenue mainly resulted from our expanded business and acquisition of UNISITS. UNISITS contributed approximately $54.23 million sales during the nine months ended September 30, 2010 as compared to $7.85 million during the same period of 2009. Our digital city business decreased by $2.13 million to $3.28 million for the nine months ended September 30, 2010, from $5.41 million during the same period of 2009. The decrease was mainly due to the fact that we no longer focus in this area of business.

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

        Nine Months Ended     Nine Months Ended  
        September 30, 2010     September 30, 2009  
        Net Sales     % of Net Sales     Net Sales     % of Net Sales  
    Transportation $ 76,990,102     91.68%   $  28,658,001     81.28%  
    Digital City   3,277,675     3.90%     5,410,966     15.35%  
    Land and resources   2,360,231     2.81%     1,092,385     3.10%  
    Other   1,344,922     1.60%     95,518     0.27%  
    Net sales $ 83,972,930     100.00%   $  35,256,869     100.00%  

    Gross Profit – Our gross profit increased approximately $13.32 million, or 86.75%, to approximately $28.68 million for the nine months ended September 30, 2010, from approximately $15.36 million during the same period of 2009. Gross profit as a percentage of net sales was 34.16% for the nine months ended September 30, 2010, a decrease of 9.41% from 43.57% during the same period of 2009. Our gross profit increase was mainly attributable to the increase of sales during the nine months ended September 30, 2010 in general. However, our gross profit increase underperformed our revenue increase from 2009 to 2010 by about 51.43%, which was mainly due to the inclusion of the financials of UNISITS whose sales generally involve more hardware components and have much lower margin than our legacy business during the nine months ended September 30, 2010.

    Selling, General and Administrative Expenses – Selling, general and administrative expenses increased by $8.49 million, or 124.88%, to $15.29 million for the nine months ended September 30, 2010, from $6.80 million during the same period of 2009. The increase is due to the following:

    • Our selling expenses increased approximately $0.61million, or 49.59%, to $1.84 million for the nine months ended September 30, 2010, from $1.23 million during the same period of 2009. As a percentage of revenues, selling expenses decreased to 2.20% for the nine months ended September 30, 2010, from 3.49% during the same period of 2009. The increase of selling expenses was mainly attributable to our expanded operations and increased sales volume as well as the enhanced marketing activities for the nine months ended September 30, 2010.

    • Our general and administrative expenses were approximately $13.44 million (16.01% of total sales) and approximately $5.57 million (15.79% of total sales) for the nine months ended September 30, 2010 and 2009, respectively. The increase of general and administrative expenses was mainly attributable to the increase of staffing, enhanced research and development efforts as well as more professional expenses associated with being a public company.

    Income Taxes – For the nine months ended September 30, 2010, we recognized income tax expense of $1.45 million and effective tax rate of 10.06% while in the same period of 2009, we recognized income tax expense of $0.11 million and effective tax rate of 1.24% .The increase in the income tax expense mainly resulted from the increased taxable net income of UNISITS during the nine months ended September 30, 2010.

    22


    Liquidity and Capital Resources

    Our principal liquidity requirements are for working capital, capital expenditures and cash dividends. We fund our liquidity requirements primarily through cash on hand, cash flow from operations and borrowings from our revolving credit facility. We believe our cash on hand, future funds from operations and borrowings from our revolving credit facility will be sufficient to fund our cash requirements for at least the next twelve months. There is no assurance, however, that we will be able to generate sufficient cash flow or that we will be able to maintain our ability to borrow under our revolving credit facility.

    As of September 30, 2010, we had cash and cash equivalents (excluding restricted cash) of approximately $21.96 million and restricted cash of approximately $3.28 million. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.

    Cash Flow

      Nine Months Ended September 30,  
        2010     2009  
     Net cash (used in) operating activities $ (12,899,069 ) $ (2,853,585 )
     Net cash (used in) provided by investing activities   (3,781,476 )   2,835,094  
     Net cash provided by financing activities   10,786,901     5,381,641  
     Effect of foreign currency translation   451,713     (359,741 )
     Net (decrease) increase in cash and cash equivalents $ (5,441,931 ) $ 5,003,409  

    Operating Activities

    Net cash used in operating activities was approximately $12.90 million for the nine-month period ended September 30, 2010, while for the same period of 2009, we had approximately $2.85 million net cash used in operating activities. The increase of the cash used in operating activities was mainly attributable to the increase of accounts receivable, which was mainly due to the increase in sales and slow seasonal collections during the nine months of 2010. We also experienced the increase in other receivable, which consists mainly of contract bidding and performance bonds that we put into escrow accounts set up by our customers for contract bidding and performance purposes. Such increases were in correlation to the increase of our sales and also negatively impacted our cash from operations. We also had an increase in prepaid expenses, which was resulted from more equipment purchases related to our projects. In addition, we had the decrease in billings in excess of costs and estimated earnings on incomplete contracts, which also negatively impacted the cash flow from operations for the nine months ended September 30, 2010 compared to the same period of 2009.

    Investing Activities

    Our primary uses of cash for investing activities are payments for the acquisition of property and equipment, as well as intangible assets.

    Net cash used in investing activities for the nine-month period ended September 30, 2010 was approximately $3.78 million, which is an increase of approximately $6.62 million from net cash provided by investing activities of approximately $2.84 million for the same period of 2009. The increase of the cash used in investing activities was mainly due to the fact that we acquired more equipment and intangible assets and increased investment in our affiliate, ChongQing QianFang Industrial Co., Ltd. during the nine months of 2010 as compared to the same period of 2009.

    23


    Financing Activities

    Net cash provided by financing activities for the nine-month period ended September 30, 2010 was approximately $10.79 million, while for the same period of 2009 we had approximately $5.38 million net cash provided by financing activities. Such change was mainly attributable to the proceeds of the securities offering of $10 million to SAIF Partners III L.P. during the first quarter of 2010.

    Financing AgreementsOn June 21, 2010, our VIE Entity, Beijing PKU Chinafront High Technology Co., Ltd., or PKU, entered into a short-term loan agreement with Bank of Beijing, Zhongguancun Branch, or Bank of Beijing, pursuant to which Bank of Beijing has agreed to loan to PKU RMB 30 million (approximately $4.49 million) as working capital. The loan has an annual interest rate based on the benchmark interest rate as of the date of the first withdrawal of the principal and the interests must be paid on a quarterly basis. The loan expires within 12 months after the date of the first withdrawal but can be renewed upon the written consent by Bank of Beijing. Under the terms of the loan agreement, PKU is subject to customary affirmative and negative covenants. The loan may be accelerated and Bank of Beijing may demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain events of liquidation or bankruptcy. As of September 30, 2010, principal amount of approximately $4.49 million was outstanding. There are no financial covenant requirements under this short-term loan agreement. We expect to renew the loan upon expiration.

    On September 29, 2009, PKU entered into a one-year short-term loan agreement with Huaxia Bank, Zhichunlu Branch, or Huaxia Bank, pursuant to which Huaxia Bank has agreed to loan to PKU RMB 30 million (approximately $4.49 million) for working capital purposes. The loan had an initial annual interest rate of 5.31%, which was floating based on interest rates determined by the People’s Bank of China from time to time. Interest is payable on a monthly basis commencing October 20, 2009. The term of the loan was extended on September 15, 2010 for six more months. Under the terms of the loan agreement, we are subject to customary affirmative and negative covenants. The loan may be accelerated and Huaxia Bank may demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain events of bankruptcy. As of September 30, 2010, principal amount of approximately $4.49 million was outstanding. There are no financial covenant requirements under this short-term loan agreement. We expect to renew the loan upon expiration.

    Future Capital Requirements – We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. In addition, because substantially all of our revenues are generated from our indirect PRC subsidiary, Oriental Intra-Asia Entertainment (China) Limited, or Oriental Intra-Asia, after it receives payments from our VIE Entities under various services and other arrangements, the ability of Oriental Intra-Asia to make dividends and other payments to us is subject to the PRC dividend restrictions. Current PRC law permits payments of dividend by Oriental Intra-Asia only out of its accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Oriental Intra-Asia is also required under PRC laws and regulations to allocate at least 10% of its annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of Oriental Intra-Asia’s registered capital. Allocations to the statutory reserve fund can only be used for specific purposes and are not transferable to us in the form of loans, advances or cash dividends. As a result, if our existing cash and amount available under existing bank loans insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities or borrow additional funds from lending institutions. We can make no assurances that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including convertible debt securities, would dilute the interests of our current shareholders. The incurrence of debt would divert cash for working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

    Off-Balance Sheet Arrangements and Contractual Obligations – Our material off-balance sheet arrangements are operating lease obligations. We excluded these items from the balance sheet in accordance with generally accepted accounting principles in the United States of America. Operating lease commitments consist principally of leases for our headquarter offices. These leases frequently include options which permit us to extend the terms beyond the initial fixed lease term. With respect to most of those leases, we intend to renegotiate those leases as they expire.

    24


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

    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

    Pursuant to Item 305(e) of Regulation S-K, the Company is not required to provide the information required by this Item as it is a “smaller reporting company.”

    ITEM 4. CONTROLS AND PROCEDURES.

    Evaluation of Disclosure Controls and Procedures.

    Our management, with the participation of our chief executive officer and interim chief financial officer, Mr. Shudong Xia and Ms. Danxia Huang, respectively, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, Mr. Shudong Xia and Ms. Danxia Huang concluded that as of September 30, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective at the reasonable assurance level.

    Changes in Internal Control Over Financial Reporting.

    During the fiscal quarter ended September 30, 2010, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

    25


    PART II
    OTHER INFORMATION

    ITEM 1. LEGAL PROCEEDINGS.

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

    ITEM 1A. RISK FACTORS

    As a smaller reporting company, the Company is not required to make disclosures under this Item 1A.

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

    We have not sold any unregistered equity securities during the fiscal quarter ended September 30, 2010 that were not previously disclosed in a current report on Form 8-K that was filed during that period.

    ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

    None.

    ITEM 4. [REMOVED AND RESERVED.]

    ITEM 5. OTHER INFORMATION.

    On September 15, 2010, PKU extended the term of the RMB 30 million loan (approximately $4.49 million) from Huaxia Bank for another six months. The loan has an initial annual interest rate of 5.31%, which is floating based on interest rates determined by the People’s Bank of China from time to time. Under the terms of the loan agreement, we are subject to customary affirmative and negative covenants. The loan may be accelerated and Huaxia Bank may demand immediate payment of the principal and accrued interests upon the occurrence of an event of default which includes, among other things, a failure to make principal or interest payments, a failure to comply with other covenants and certain events of bankruptcy. As of September 30, 2010, principal amount of approximately $4.49 million was outstanding. There are no financial covenant requirements under this short-term loan agreement. We expect to renew the loan upon expiration.

    ITEM 6. EXHIBITS.
     
    EXHIBITS.

    Exhibit  
    Number Description
       
    31.1* Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
    31.2* Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
    32.1* Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
    32.2* Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
    * Filed herewith.  

    26


    SIGNATURES

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

    DATED: November 12, 2010

    CHINA TRANSINFO TECHNOLOGY CORP.

    By: /s/ Shudong Xia                                                       
    Shudong Xia
    Chief Executive Officer
    (Principal Executive Officer)

    By: /s/ Danxia Huang                                                      
    Danxia Huang
    Interim Chief Financial Officer
    (Principal Financial Officer)



     EXHIBIT INDEX
    Exhibit  
    Number Description
       
    31.1* Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
    31.2* Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
    32.1* Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
    32.2* Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
    * Filed herewith.