Summary of TRITON DISTRIBUTION SYSTEMS, INC.

Item 2. Management's Discussion and Analysis or Plan of Operations

Special Note Regarding Forward-Looking Information

This Annual Report of Triton Distribution Systems, Inc. on Form 10-KSB contains certain "forward-looking statements" All statements in this Annual Report other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any statements of the plans and objectives for future operations and any statement of assumptions underlying any of the foregoing. Statements that include the use of terminology such as "may," "will," "expects," "believes," "plans," "estimates," "potential," or "continue," or the negative thereof or other and similar expressions are forward-looking statements. Forward-looking statements in this report include, but are not limited to, statements regarding expanding the use of our technologies in existing and new markets; diversification of sources of; our expected profit margin from all product sales; the future impact of our critical accounting policies, including those regarding revenue recognition, allowance for doubtful accounts, accounting for income taxes, and stock-based compensation; statements regarding the sufficiency of our cash reserves; and our expected rate of return on investments, if any. Actual results may differ materially from those discussed in these forward looking statements due to a number of factors, including: the rate of growth of the markets for our technology; the accuracy of our identification of critical accounting policies and the accuracy of the assumptions we make in implementing such policies; the accuracy of our estimates regarding our taxable income and cash needs for the next twelve months; and fluctuations in interest rate and foreign currencies These forward-looking statements involve risks and uncertainties, and it is important to note that our actual results could differ materially from those projected or assumed in such forward-looking statements. Among the factors that could cause actual results to differ materially are the factors detailed under the heading "Risk Factors" as well as elsewhere in this Annual Report on Form 10-KSB. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement or risk factor. You should consider the factors affecting results and risk factors listed from time to time in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-KSB, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to such reports. Such filings are available on our website, free of charge, at www.tritonds.com, but the information on our website does not constitute part of this Annual Report.

As used herein, unless the context otherwise requires, Triton Distribution Systems, Inc., together with our Chinese subsidiary, Triton Distribution Systems (Beijing) and our Philippine subsidiary, Triton Distribution Systems Philippines Inc. are referred to in this Annual Report on Form 10-KSB as "Triton", "Company," "we," "us" and "our."

Overview

We are an emerging, next generation Web-based travel services and distribution company. Our core business is the electronic distribution of travel inventory from airlines, car rental companies, hotels, tour and cruise operators, and other travel sellers to travel agencies and their clients on a global basis.

We commenced operations in January 2006 with an initial emphasis on Southeast Asia and intend to expand to other international locations, including South America and Europe. Unlike the travel industry in the United States, which is highly fragmented and decentralized, emerging countries in Asia have only one or two flagship airlines for international routes, the airlines are controlled by the government, the travel agencies are clustered in large associations, and the government has considerable influence over decisions which affect bookings and the issuance of tickets to domestic and foreign travelers.

Critical Accounting Policy and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since these estimates are inherently uncertain, actual results may materially differ.

The following is a discussion of our accounting policies that are both most important to the portrayal of our financial condition and results, and that require management's most difficult, subjective, or complex judgments.

Intangible Assets

The determination of the fair value of certain acquired intangible assets is subjective in nature and often involves the use of significant estimates and assumptions. Further, estimating the useful lives of these assets requires the exercise of judgment due to the rapidly changing technology environment. Historically, we have estimated the fair value of our intangible assets based on the purchase price.

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," we evaluate our intangible assets and other long-lived assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from our estimated future cash flows. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired and it is written down to the undiscounted cash flow value. We have determined, at the acquisition date, the useful life of our currently held intellectual property was 10 years. We amortize intellectual property using the straight-line method.

As of September 30, 2008 we have no internally developed intangible assets.

Stock Based Compensation

We estimate the fair value of stock option awards to employees using a Black-Scholes pricing model on the grant date in accordance with SFAS No. 123(R) Share Based Payment. The pricing model requires us to make assumptions related to the expected term of the options, which generally differs from the contractual term; expected volatility of our stock price, accounting for known significant events which may have a material impact on the market value of our stock; the risk free interest rate on the grant date for instruments with maturities commensurate with the expected term of the options; and the dividend yield.

Due to the limited history of our company, for all options granted in 2006 we have estimated that the expected term of the employee options to be three years. We currently do not have a trading history that allows us to reasonably estimate the expected volatility of our common stock, therefore the expected volatility of our stock was based on the historical volatility of public companies with similar characteristics. These characteristics include industry, stage of life cycle, size, financial leverage, and other factors. We periodically review and adjust these assumptions in determining the fair value of future option grants.

Adoption of new accounting policies

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined as follow:

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

As of September 30 , 2008 the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Liquidity and Capital Resources

We have not generated any revenue from our operations since our inception on January 10, 2006. As a result, our primary source of liquidity is through debt and equity financing arrangements with independent third party investors, as well as related parties. Further, we have been successful at entering into agreements with several of our service providers to accept shares of our common stock in consideration for services received.

Debt issuances throughout the period ended September 30, 2008, all of which are short-term, resulted in a working capital deficit of approximately $8.4 million at September 30, 2008. As of September 30, 2008 we had approximately $7.2 million in loans that mature on or prior to February 7, 2009. Of this amount, $3 million, plus accrued interest, may be converted to shares of Company common stock any time prior to its maturity on September 30, 2009 at the sole discretion of the loan holder. The remaining balances of our notes as of September 30, 2008 do not contain any conversion options. The 120,000 convertible notes we obtained in July matured in 2011.See Note 5 of our consolidated financial statements for a complete description of the terms of our loans payable at September 30, 2008.

For the period ended September 30, 2008 we received $128,160 from issuances of our common stock which was applied towards account payable for legal fees. Throughout the period we issued an aggregate 928,470 shares of our common stock for compensation to our legal counsel. We recognized approximately $661,436 in stock based compensation for options issued to our employees. The value of the amount issued to third party service providers was approximately $272,500 which is being recognized over the remaining lives of the corresponding service contracts. See Note 6 of our consolidated financial statements for a complete description of our stock issuances during the period ended September 30, 2008.

Our current and historic liquidity concerns have resulted in our focus being near term based. Our efforts are concentrated on developing revenue generating activities in geographical areas that appear most likely for success. Initially, these areas appear to be Southeast Asia, China, and Europe.

Our current forecasts are that our 2008 operations will be insufficient to meet our current debt obligations, or our other working capital needs. As a result, throughout 2008, we entered into additional short term loan arrangements to meet our on-going working capital needs. We are actively pursuing longer term debt financing arrangements on terms that are more favorable to the Company. We obtained $120,000 convertible notes from Scottsdale, See Note 5. In addition to seeking the above debt financing, we are contemplating raising additional capital through equity issuances in 2008. Any additional equity issuances will be dependent upon market conditions, achievement of certain milestones in our technology development, and identification of specific needs.

In the event we are unsuccessful in our capital raising efforts or generating revenue from our operations we will not continue as a going concern.

Results of Operations

Revenue

We have not generated any revenue since our inception on January 10, 2006. We have made significant progress in the development of our technology and have entered into a series of distribution agreements as of September 30, 2008. Based on these agreements and improvements we have made to our technology our objective is to emerge from the development stage during fiscal year 2008.

Operating Expenses

Our operating expenses from inception to September 30, 2008 were $22,638,854 which consisted of payroll and related benefits of $12,315,859, professional fees of $5,738,565, marketing and advertising of $598,064 and other general and administrative expenses of $3,986,366.

Interest expense from inception to September 30, 2008 was $3,884,287 which consisted of interest accrued on the notes payable to related parties and interest income for the period was $67,817.

Related Parties

During the fiscal years ending December 31, 2006 and December 31, 2007, and the nine month period ending September 30, 2008, we borrowed money from shareholders and officers to meet operating cash flow, see "Note 9" of the financial statements.

Plan of Operation

At December 31, 2007 our cash resources were insufficient to fund the Company's current and expected operations. Throughout the fourth quarter of 2007 and the first nine months of 2008 our concentration was centered on obtaining the necessary funding to meet our current obligations and expected additional 2008 needs. For the period ended September 30, 2008, we obtained additional short-term debt financing of approximately $4.5 million to meet our obligations and working capital needs through the first three quarters of 2008. Additionally, we have focused on reducing and reallocating our expenses to activities that are essential to distributing our products and services to our target markets. To that end, we have reduced our workforce from 45 to 29; limited travel and related expenses; and entered into equity payment arrangements with several of our service providers.

As noted in our Part I, Item 1 - Description of Business, our initial emphasis was on Southeast Asia and China. Our current plans consist of continued focus in China and Europe. The lack of decentralization of the travel industry in these geographic areas remains attractive for the implementation and use of our electronic distribution system of travel inventory from airlines, travel agencies, cruise operators, and other travel related service providers. Additionally, we are concentrating our efforts on the business to business (B2B) market which appears to be relatively "un-tapped" by our significant competitors. Current estimates indicate 80% of global airline tickets and 70% of all travel is booked by service providers in our target markets. Travel and Tourism Forecast World, as of May 2006, estimated the global travel distribution market at over $10 billion.

We believe our internet-based distribution platform and low-fee structure provides us certain advantages in penetrating our target markets since our main competitors' distribution systems generally operate on high-cost, legacy mainframe technology platforms. This appears to be particularly true in less technologically advanced countries such as China.

We are building on our already strong Chinese infrastructure. Our Red Dragon Express ™ is the only comprehensive travel solution where any agent can create a local Chinese itinerary, including international and domestic segments; construct passenger records; and clear payments, all on a seamless and low cost basis. We also enjoy an association with the China International Travel Service (CITS), an important Chinese government supported entity and China's largest and most influential tourist enterprise group. CITS has a network of more than 1,400 agents and tour companies nationwide and has hosted more than 10 million international visitors to China.

We have entered into a non-binding letter of intent to acquire a 100% ownership of a European Company that serves as the general sales agent for the German Railway System and has a network of over 25,000 travel agents in Germany, Switzerland, Austria, Russia, and Poland. The approximate cost of this acquisition would be Euro $7.5 million .

We expect to continue to devote funding and personnel to research and product development as well as to the enhancement of existing product lines and the fulfillment of foreign joint ventures. We plan to develop new "add-ons" and extension modules in response to client needs and requests. Included in the our development pipeline are booking systems for private corporate executive jets and regional air flights, air cargo carriers, railroad travel, ferries, private clubs and bed and breakfast establishments.

Our plans, including the above potential acquisitions, are dependent upon our ability to obtain financing on terms that are not further detrimental to the Company. If we are unable to obtain financing in 2008 we will likely become insolvent by the end of 2008.

Employees

Our employee head count was 29 as of September 30, 2008.

Off-Balance Sheet Arrangements

There are no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.