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 software, 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. We also design systems that track natural waterway levels for drought control, monitor groundwater quality and assist the government in managing its water resources.

For the nine months ended September 30, 2008 and 2009, our total revenues amounted to approximately $5.6 million and $10.9 million, respectively. 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 incomes for the same periods ended September 30, 2008 and 2009 were $1.3 million and $2.5 million, respectively.

Our total revenues come from services we provide in our two operating segments,
(i) wastewater and tail gas treatment and (ii) water resource management. In these segments, we provide system integration services and sell hardware and software products.

System integration is the integration of the component subsystems into one system and monitoring of subsystems to ensure they function together as a system. Based upon our customers' requirements and needs, we provide them turn-key solutions, including engineering design, procurements, manufacturing, software, installation, commissioning, training, and final acceptance. We realize the revenues from system integration sales based on percentage of completion.

Hardware product sales are based on our customers' requirements and needs. We specify the right hardware equipment and components and sell hardware to the customers "as is" without providing software or other value-adding to the customers' systems.

We sell our software products by providing customers with proprietary software with or without adding some standard interface software. Other than our operational expenses, we incur a few additional costs in connection with software product sales.

We generally require customers to pay minimum payments of 30% of a project's total cost in advance and bill them the balance within 30 days after the transactions are completed. Sometimes, customers require 5-10% retainage for a 12-month warranty period. In such cases, we realize the retainage fee revenue when the warranty period expires and we receive the retainage fee payment.

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 the Chinese central and local governments invest 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 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 economy in China, 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 intend to use the net proceeds for working capital, product research and development, application expansion and sales and marketing.

Macro-Economic Factors and Chinese Government Response

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. The global economic growth rate also significantly decreased. Under such an uncertain and unstable economy and market, the Chinese government adjusted several major economic policies, including the use of a stimulus package in an effort to reach an 8% annual economic growth rate in 2009 and to encourage major banks to increase liquidity. China's new bank loans in the first, second and third quarters of 2009 were $663 billion, $408 billion and $191 billion, respectively. Water resources and environmental protection infrastructure construction is one of the major sectors that is expected to benefit from this increased liquidity.

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 first nine months of 2009 reached RMB 21.78 trillion (or $3.2 trillion), an increase of 7.7% compared to the same period in 2008. The growth rates for the first, second and third quarters of 2009 were 6.1%, 7.9% and 8.9%, respectively, compared to the same period in 2008. Fixed asset investment ("FAI") in the first nine months of 2009 rose by 33.4%.

China's spending in water resources, environmental protection and other infrastructure increased 54.5% year to year. The second tranche of central government funding (RMB 130 billion, or $19.1 billion as of February 2009) was allocated to rural infrastructure projects such as improving drinking water safety and electric grids and repairing roads (RMB 31.5 billion or $4.6 billion) and to environmental projects (RMB 11 billion or $1.6 billion).

According to the budget plan announced by Ministry of Water Resources, China expects to invest $11.7 billion in 2009 in water resources sectors. China's central government has allocated $3.8 billion in the first half of 2009. With the projects the central government has approved, this investment is expected to increase to $45 billion in the aggregate over the next 3 years. The projects include mitigation of 6,240 small and middle-sized reservoirs that are considered unsafe due to several years' lack of proper maintenance.

Based on the data shown above, we believe that Tri-Tech is likely to continue to grow in 2009 because our business scope includes water resources, flood control and mitigation, water quality monitoring and assessment, municipal water and wastewater management, water reuse, and odor control, all areas that are poised to benefit from China's infrastructure investment.

New Opportunities in Water Resources and Wastewater Treatment

We are currently pursuing over 100 smaller river basin flood monitoring and forecasting systems with a market potential of approximately $72.5 million, and groundwater monitoring systems for over 100 counties across the country with a market potential of another $72.5 million. There can be no guaranty that we will be successful in all or any of these endeavors. 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 market potential of approximately $43.5 million.

In 2009, the Chinese government approved the Mountain Torrent Forecast Plan proposed by the Ministry of Water Resources and the Ministry of Environmental Protection, Accordingly, the Chinese government allocated RMB 200 million (approximately $29 million) to fund projects in 103 pilot counties, which are frequently devastated by mountain torrents. In June 2009, the China State Flood Control and Drought Relief Headquarter initiated 50 pilot projects. We won the bids for 8 of these 50 pilot projects. The development is in line with our earlier indications of our goals.

The South-North Water Transfer Project is a large, inter-basin, long-distance water transfer project that is charged with dozens of major urban water supply tasks for such cities as Beijing, Tianjin and Shijiazhuang. This project is intended to help address China's water shortages in the north by transporting water from China's southern regions, which have been affected by flooding in the past. The current automated dispatch system monitors a total of 304 buildings. As a result of our ability to assist with (i) the use of information acquisition and processing technology, (ii) the modernization of the operations maintenance and management, (iii) the establishment of a sound system and (iv) the greatest degree of rational management of water to make full use of China's valuable water resources, we expect an increase in sales of this project.

China frequently faces flash floods and similar national disasters, so strengthening the prevention and treatment of such disasters is essential. System monitoring of rainfall by the water system, early warning system and early warning response system consists of three parts. Data and early warning information processing service as the core, through computer networks, databases, early warning command and control platform release constitutes a set of flash floods disaster early warning system. We expect an increase in sales of the following projects proposed by the Ministry of Water Resources: (i) National Flood Control and Drought Relief Headquarter facilities (Phase II),
(ii) Nationwide Mountain Torrent Forecast and Prevention Pilot Program;
(iii) Nationwide Hydrologic Monitoring Systems for Small- and Middle-sized River Basins (Phase I); (iv) Nationwide Flood Information Communication and Forecasting Systems for Key Small and Middle-sized Reservoirs (under design by others); (v) State Water Resource Management System (Pilot Stage), and
(vi) Groundwater Monitoring Program of the Bureau of Hydrology of the Ministry of Water Resources.

Our wastewater treatment business segment focuses on Tianjin City and Hebei Province. Specifically, the Tianjin Binhai New Area spurs the growth of the total output value with major new infrastructure projects. The total GDP output value of the Binhai New Area is expected to increase by 22%. Within the next few years, Binhai New Area plans to construct over 40 large scale pumping stations and over 30 sewage treatment plants, which we believe have a total market potential of approximately $8.7 billion.

According to the Tianjin Central Urban Area storm and sanitary sewage systems construction and retrofitting plan, the total spending for construction and retrofitting will be RMB 4.79 billion (approximately $704.4 million) and RMB 480 million (approximately $70.59 million), respectively. Recently, Tri-Tech won a contract for multiple pump station retrofitting projects in Tianjin and will continue to pursue major pump stations construction and retrofitting related contracts.

Hebei Province is another targeted market. Hebei Province plans to construct over 50 sewage and grey water reuse treatment plants in the next two years. We believe the total spending may reach RMB 8.38 billion (approximately $1.23 million). Recently, Tri-Tech won multiple contracts for sewage treatment plants in Hebei Province.

We are actively pursuing opportunities in the industrial wastewater and process tail gas treatment market in the petrochemical industry, such as the SINOPEC Yanshan Plant, the Petro China Jilin Plant, the SINOPEC Anqing Plant, and the Petro China Dalian Plant.

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 increased work load. In order to pursue several major new water projects, we registered a branch office in Tianjin Dongli Economic Development Zone and set up a branch office in Hebei Province to get closer to our clients.

Working Capital and Cash Flow Management

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

We believe that our operating income and these net proceeds will be likely to allow our company to fund its organic growth. 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:

• 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, 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

• Borrow short-and long-term commercial loans: as of September 30, 2009, our company had long-term debt of $69,069 and short-term debt of $695,370. Therefore, we believe we are in a strong position to raise cash through debt financing if appropriate.

Three Month Period Ended September 30, 2009 Compared to Three Month Period Ended
                               September 30, 2008

                             Results of Operations

The following table sets forth a summary of our unaudited consolidated results
of operations for the periods indicated.



                                          Quarter Ended           Quarter Ended
                                       September 30, 2009       September 30, 2008             Change
                                     $ (thousands)       %     $ (thousands)    %     $ (thousands)        %
Revenue                                      4,910       100           2,122    100           2,788       131.4
Cost of Revenues (exclusive of
depreciation and amortization,
which are shown separately below)            2,990      60.9           1,218   57.4           1,772       145.5
Selling Expenses                               121       2.5              72    3.4              49        68.1
Depreciation and Amortization
Expenses                                        30       0.6              21    1.0               9        42.9
Other General and Administrative
Expenses                                       429       8.7             276   13.0             153        55.4
Other Income (expenses)                         46       0.9               0     -               46          -

Income before Tax and
Non-controlling interest income              1,386      28.2             535   25.2             851       159.1
Provision for income taxes                     314       6.4              20    0.9             294       1,470
Non-controlling interest income                 (1 )       0               9    0.4             (10 )    (111.1 )
Net income attributable to TRIT              1,073      21.9             506   23.8             567       112.1

Revenues

Our total revenues increased by 131.4% from $2.12 million for the quarter ended September 30, 2008 to $4.91 million for the quarter ended September 30, 2009. This increase was due to the increased size and efforts of our sales force, the growth of our client base, the completion of more and larger projects and the improvement of our project execution capabilities. Further, a majority of the revenues for the quarter ended September 30, 2009 were generated from the sales of system integration.

Cost of revenues (exclusive of depreciation and amortization)

Our cost of revenues (exclusive of depreciation and amortization) increased 145.5% from $1.22 million for the quarter ended September 30, 2008 to $2.99 million for the quarter ended September 30, 2009. Cost of revenues (exclusive of depreciation and amortization) increased more quickly than revenues due to relatively higher costs of the hardware products compared to system integration and software products.

Selling expenses

Our selling expenses increased by 68.1% from $71,698 for the quarter ended September 30, 2008 to $120,918 for the quarter ended September 30, 2009.

Our selling expenses primarily consist of commissions and travel expenses of our selling staff to customers' headquarters or project sites. Our selling expenses increased for the quarter ended September 30, 2009, mainly due to the increase in the number of customers we served and an increase in the size of our sales forces.

General and administrative expenses

Our general and administrative expenses primarily consist of salaries and benefits for our staff, depreciation expenses, office rental expenses, traveling expenses, and expenses for legal, accounting and other professional services.

Our general and administration expenses increased by 54.6% from $297,240 for the quarter ended September 30, 2008 to $459,628 for the quarter ended September 30, 2009. The expenses increased in 2009 because our research and development and IPO expenses increased. We did not significantly increase the management and support staff. However, we expect that our general and administration expenses will increase in the near term as a result of Sarbanes-Oxley Section 404 compliance and business expansion.

Other income (expenses)

Because we are a certified software hi-tech company, we receive a partial tax rebate from the Chinese government for value added tax ("VAT") paid on software we sell. This partial rebate is classified as other income. Due to the increase in partial VAT rebate, our other income increased by $46,529, from an expense of $18 for the quarter ended September 30, 2008 to income of $46,511 for the quarter ended September 30, 2009.

Net income

Our net income attributable to TRIT increased 112.1% from $506,441 for the quarter ended September 30, 2008 to $1,073,611 for the quarter ended September 30, 2009.

 Nine Month Period Ended September 30, 2009 Compared to Nine Month Period Ended
                               September 30, 2008

                             Results of Operations

The following table sets forth a summary of our consolidated results of
operations for the periods indicated.



                                       Nine Months Ended      Nine Months Ended
                                       September 30, 2009     September 30, 2008            Change
                                      $ (thousands)    %     $ (thousands)    %     $ (thousands)       %
Revenue                                      10,905    100           5,551    100           5,354      96.5
Cost of revenues (exclusive of
depreciation and amortization,
which are shown separately below)             6,536   59.9           3,201   57.7           3,335     104.2
Selling expenses                                333    3.1             173    3.1             160      92.5
Depreciation and amortization
expenses                                         75    0.7              60    1.1              15      25.0
Other general and administrative
expenses                                      1,038    9.5             841   15.2             197      23.4
Other income (expenses)                          65    0.6              78    1.4             (13 )   (16.7 )
Income before tax and
non-controlling interest income               2,988   27.4           1,354   24.4           1,634     120.7
Provision for income taxes                      450    4.1              60    1.1             390       650
Non-controlling interest income                  12    0.1              14    0.3              (2 )   (14.3 )
Net income attributable to TRIT               2,526   23.2           1,280   23.1           1,246      97.3

Revenues

Our total revenues increased by 96.5% from $5.55 million for the nine months ended September 30, 2008 to $10.91 million for the nine months ended September 30, 2009. This increase was due to the increased size and efforts of our sales force, the growth of our client base, the completion of more and larger projects and the improvement of our project execution capabilities. Further, a majority of the revenues for the nine months ended September 30, 2009 were generated from the sales of system integration, hardware products and the sales of software.

Cost of revenues (exclusive of depreciation and amortization)

Our cost of revenues (exclusive of depreciation and amortization) increased 104.2% from $3.20 million for the nine months ended September 30, 2008 to $6.53 million for the nine months ended September 30, 2009. Cost of revenues (exclusive of depreciation and amortization) increased more quickly than revenues due to relatively higher costs of the hardware products compared to system integration and software products.

Selling expenses

Our selling expenses increased by 92.5% from $173,094 for the nine months ended September 30, 2008 to $333,572 for the nine months ended September 30, 2009.

Our selling expenses primarily consist of commissions and traveling expenses of our staff to customers' headquarters or project sites. Our selling expenses increased for the nine months ended September 30, 2009, mainly due to the increase in the number of customers we served and the size of our sales forces.

General and administrative expenses

Our general and administrative expenses primarily consist of salaries and benefits for our staff, depreciation expenses, office rental expenses, traveling expenses, and expenses for legal, accounting and other professional services.

Our general and administration expenses increased by 23.4% from $900,882 for the nine months ended September 30, 2008 to $1,111,991 for the nine months ended September 30, 2009. The expenses increased only slightly in 2009 because we did not significantly increase the management and supporting staff. However, we expect that our general and administration expenses will increase in the near term as a result of Sarbanes-Oxley Section 404 compliance and business expansion.

Other income (expenses)

Because we are a certified software hi-tech company, we receive a partial tax rebate from the Chinese government for VAT paid on software we sell. This partial rebate is classified as other income. Due to the decrease in partial VAT rebate, our other income decreased by $12,806 or 16.4%, from $78,107 for the nine months ended September 30, 2008 to $65,301 for the nine months ended September 30, 2009.

Net income

Our net income attributable to TRIT increased 97.3% from $1,279,658 for the nine months ended September 30, 2008 to $2, 525,545 for the nine months ended September 30, 2009.

Liquidity and Capital Resources

Cash flows and working capital

As of September 30, 2009, we had working capital of $17,418,890, including cash
of $10,306,076. Our cash includes cash-in-hand and bank savings. The table below
reflects our company's cash situation:



                                           For the Nine Months Ended          For The Three Months Ended
                                                 September 30,                      September 30,
                                            2009                2008            2009                2008
Operating activities                    $        (287 )             729    $         (455 )             413
Financing activities                           10,517               383            11,067               145
Investing activities                             (776 )              26              (584 )              36
Effects of exchange rate                          120               102                75                 8
Cash, beginning of period                         732               368               203             1,006
Increase (decrease) in cash                     9,574             1,240            10,103               602
Cash, end of period                     $      10,306             1,608    $       10,306             1,608

Operating activities

Net cash used in operating activities was $287,892 for the nine months ended September 30, 2009 as compared to $729,533 net cash provided by operating activities in the nine months ended September 30, 2008. The decrease of $1,017,425 in net cash provided by operating activities is mainly attributable to several factors, including (i) an increase in accounts receivable of $ 1,005,397 and unbilled $2,780,854; (ii) an increase in net income $1,244,814 ;
(iii) an increase in inventories of $184,068; (iv) an increase in other receivables $494,253; and (v) an increase in accounts payable of $1,190,555.

Net cash used in operating activities was $454,647 for the three months ended September 30, 2009 as compared to $412,984 net cash provided by operating activities in the three months ended September 30, 2008. The decrease of $867,631 in net cash provided by operating activities is mainly attributable to several factors, including (i) an increase in accounts receivable of $120,593 and unbilled $2,114,715; (ii) an increase of $565,897 in net income; (iii) an increase of $157,780 in other receivables; (iv) an increase of $850,634 in accounts payable.

Investing activities

Net cash used in investing activities for the nine months ended September 30, . . .