China Information Security Technology, Inc. Announces Second Quarter 2010 Results

Conference Call

China Information Security will host a corresponding conference call and live webcast at 8:00 am Eastern Daylight Time (8:00 pm, Beijing time) on Thursday, August 5, 2010.

    The dial-in details for the live conference call are as follows:

    -- U.S. Toll Free Number:           1-866-519-4004
    -- International Dial-in Number:    +65-6723-9381
    -- Mainland China Toll Free Number: 10-800-819-0121
    -- Hong Kong Toll Free Number:      80-093-0346
          Conference ID: 90844727

A live and archived webcast of the conference call will be available on the Investor Relations section of China Information Security's website athttp://www.chinacpby.com .

A telephone replay of the call will be available from August 5, 2010 through August 12, 2010.

    The dial-in details for the replay are as follows:

    -- U.S. Toll Free Number            1-866-214-5335
    -- International Dial-in Number     +61-2-8235-5000
          Conference ID: 90844727

About China Information Security Technology, Inc.

China Information Security Technology, Inc., together with its subsidiaries, specializes in Geographic Information Systems (GIS), digital public security and hospital information systems, with the goal of being the largest GIS software provider in the People's Republic of China. Headquartered in Shenzhen, China, the Company's total solutions include specialized software, hardware, systems integration, and related services organized into three business segments - Geographic Information Systems, Digital Information Security Technology (DIST), and Digital Hospital Information Systems (DHIS). To learn more about the Company, please visit its corporate website at http://www.chinacpby.com .

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China Information Security Technology, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the significance of the Company's new contract wins during the quarter; the ability of the Company to continue to strengthen its position in the industry by winning and successfully performing under national contracts; the ability of the Company to secure future opportunities in the market by leveraging its R&D capabilities and reputation; the continued support of the Chinese government for domestic GIS products; the general ability of the Company to achieve its commercial objectives, including the Company's plan to sustain the growth while creating shareholder value; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website ( http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

    For further information, please contact:

    China Information Security Technology, Inc.
     Iris Yan
     Tel:   +86-755-8370-4767
     Email: ir@chinacpby.com
     Web:   http://www.chinacpby.com

    Christensen
     Kathy Li
     Tel:   +1-480-614-3036
     Email: kli@christensenir.com

     Roger Hu
     Tel:   +86-158-1049-5326
     Email: rhu@christensenir.com



                 CHINA INFORMATION SECURITY TECHNOLOGY, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                  AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
                          Expressed in U.S. dollars
                   (Except for share and per share amounts)

                                                 June 30         December 31
                                                   2010              2009
    ASSETS                                      (Unaudited)

    CURRENT ASSETS
    Cash and cash equivalents                   $17,745,272      $ 13,478,633
    Restricted cash                               5,795,203         5,859,910
    Accounts receivable:
    Billed, net of allowance for doubtful
     accounts of $2,944,000 and
     $3,123,000, respectively                    24,114,664        23,907,035
    Unbilled                                     58,149,465        47,851,638
    Bills receivable                                218,622                --
    Advances to suppliers                         4,084,692         6,924,035
    Amount due from related parties, net
     of allowance for doubtful accounts
     of $0 and $73,000, respectively                158,467           129,937
    Inventories, net of provision of
     $183,000 and $184,000, respectively         20,985,556        10,936,004
    Other receivables and prepaid
     expenses                                    14,751,936        15,405,089
    Deferred tax assets                                         1,622,613                  1,719,327
        TOTAL  CURRENT  ASSETS                                                147,626,490              126,211,608

        Deposit  for  software  purchase                                  4,797,561                  1,426,452
        Deposit  for  purchase  of  land  use
          rights                                                                                  925,912                                --
        Long-term  investments                                                  2,873,722                  2,862,016
        Property,  plant  and  equipment,  net                      62,612,136                53,586,514
        Land  use  rights,  net                                                    2,123,702                  1,907,611
        Intangible  assets,  net                                              13,138,669                13,556,141
        Goodwill                                                                          50,067,871                50,609,866
        Deferred  tax  assets                                                          428,336                      668,730
        TOTAL  ASSETS                                                              $284,594,399          $  250,828,938

        LIABILITIES  AND  EQUITY

        CURRENT  LIABILITIES
        Short-term  bank  loans                                              $22,121,740            $  15,927,780
        Accounts  payable                                                          17,115,384                20,159,317
        Bills  payable                                                                10,605,305                12,658,029
        Advances  from  customers                                              3,266,171                  3,950,744
        Amount  due  to  related  parties,
          current  portion                                                                667,138                      583,736
        Accrued  payroll  and  benefits                                    1,609,966                  3,142,240
        Other  payables  and  accrued  expenses                    14,969,739                14,252,918
        Contingent  consideration,  current
          portion                                                                            1,568,437                  1,857,994
        Income  tax  payable                                                        3,875,563                  3,290,245
        TOTAL  CURRENT  LIABILITIES                                        75,799,443                75,823,003

        Long-term  bank  loans                                                    4,036,020                  1,907,100
        Amount  due  to  related  parties,  long-
          term  portion                                                                  5,015,528                                --
        Contingent  consideration,  net  of
          current  portion                                                            2,224,685                  2,635,397
        Deferred  tax  liabilities                                            1,896,337                  2,564,604
        TOTAL  LIABILITIES                                                        88,972,013                82,930,104

        COMMITMENTS  AND  CONTINGENCIES                                                --                                --



                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                                        CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                        AS  OF  JUNE  30,  2010  AND  DECEMBER  31,  2009  (CONTINUED)
                                                    Expressed  in  U.S.  dollars
                                      (Except  for  share  and  per  share  amounts)

        EQUITY
        Common  stock,  par  $0.01;  authorized
          capital  200,000,000  shares;  shares
          issued  and  outstanding  2010:
          51,811,787:  2009:  49,905,141  shares        $            252,615                    $233,548
        Treasury  stock,  6,000  shares,  at  cost                    (11,468)                    (11,468)
        Additional  paid-in  capital                                    89,128,945                78,495,062
        Reserve                                                                            8,345,371                  8,345,371
        Retained  earnings                                                      76,095,452                60,462,275
        Accumulated  other  comprehensive  income              6,020,572                  5,016,575
        Total  equity  of  the  Company                                179,831,487              152,541,363
        Non-controlling  interest                                        15,790,899                15,357,471
        Total  equity                                                              195,622,386              167,898,834

        TOTAL  LIABILITIES  AND  EQUITY                              284,594,399              250,828,938



                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                                  CONDENSED  CONSOLIDATED  STATEMENTS  OF  INCOME
        FOR  THE  THREE  AND  SIX  MONTHS  ENDED  JUNE  30,  2010  AND  2009    (Unaudited)
                                                    Expressed  in  U.S.  dollars
                                      (Except  for  share  and  per  share  amounts)

                                                              Three  Months  Ended                Six  Months  Ended
                                                            June  30,        June  30,        June  30,          June  30,
                                                                2010                2009                2010                  2009

        Revenue  -  Products              $7,471,511  $  3,789,288    $13,819,481      $6,610,416
        Revenue  -  Software              22,406,236    15,921,487      37,584,868      24,932,952
        Revenue  -  System
          integration                            3,485,523      5,571,619        6,269,406        8,527,076
        Revenue  -  Others                        153,618          505,525        1,148,240            697,659
        TOTAL  REVENUE                        33,516,888    25,787,919      58,821,995      40,768,103

        Cost  -  Products  sold            5,813,701      3,007,849      11,054,123        5,620,640
        Cost  -  Software  sold          10,257,690      5,993,637      16,659,101        8,694,577
        Cost  -  System
          integration                                570,721      4,395,011        3,046,531        6,540,763
        Cost  -  Others                                76,470          124,671            146,481            162,108
        TOTAL  COST                              16,718,582    13,521,168      30,906,236      21,018,088

        GROSS  PROFIT                          16,798,306    12,266,751      27,915,759      19,750,015

        Administrative  expenses    (2,621,501)  (2,304,376)    (5,391,532)    (4,520,723)
        Research  and  development
          expenses                                    (560,649)      (720,411)    (1,130,080)    (1,224,263)
        Selling  expenses                  (1,489,212)      (644,349)    (2,703,774)    (1,238,064)
        INCOME  FROM  OPERATIONS      12,126,944      8,597,615      18,690,373      12,766,965

        Subsidy  income                            268,898          318,071            431,680            515,860
        Other  (loss)/income,  net      (324,700)        (16,845)          642,099            164,521
        Interest  income                            10,403          120,627              29,294            197,544
        Interest  expense                      (263,756)        (56,443)        (412,647)        (116,653)
        INCOME  BEFORE  INCOME
          TAXES                                      11,817,789      8,963,025      19,380,799      13,528,237

        Income  tax  expense              (2,163,609)  (1,091,800)    (3,334,692)    (1,680,196)
        NET  INCOME                                9,654,180      7,871,225      16,046,107      11,848,041

        Less:  Net  income
          attributable  to  the
          non-controlling
          interest                                    (302,111)        (73,395)        (412,930)        (293,218)


        NET  INCOME  ATTRIBUTABLE
          TO  THE  COMPANY
                                                          $9,352,069    $7,797,830    $15,633,177    $11,554,823

        Weighted  average  number
          of  shares
        Basic                                        51,450,623    47,536,883      51,332,698      47,528,503
        Diluted                                    51,450,623    47,536,883      51,332,698      47,528,503

        Earnings  per  share  -
          Basic  and  Diluted
        Basic  -  Net  income
          attributable  to  the
          Company's  common
          stockholders                                  $0.18              $0.16                $0.30                $0.24

        Diluted  -  Net  income
          attributable  to  the
          Company's  common
          stockholders                                  $0.18              $0.16                $0.30                $0.24



                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                    CONDENSED  CONSOLIDATED  STATEMENTS  OF  COMPREHENSIVE  INCOME
        FOR  THE  THREE  AND  SIX  MONTHS  ENDED  JUNE  30,  2010  AND  2009    (Unaudited)
                                                    Expressed  in  U.S.  dollars
                                      (Except  for  share  and  per  share  amounts)

                                                                Three  Months  Ended                Six  Months  Ended
                                                              June  30,        June  30,          June  30,          June  30,
                                                                  2010                2009                  2010                2009

        Net  income                                  $9,654,180    $7,871,225    16,046,107    $11,848,041
        Other  comprehensive
          income:
        Foreign  currency
          translation  gain                          787,465          (16,365)    1,024,495            435,377

        Comprehensive  income              10,441,645      7,854,860    17,070,602      12,283,418
        Comprehensive  income
          attributable  to  the  non-
          controlling  interest
                                                                  (322,572)        (73,310)      (433,428)        (293,133)
        Comprehensive  income
          attributable  to  the
          Company                                    $10,119,073    $7,781,550    16,637,174    $11,990,285



                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                              CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                  FOR  THE  SIX  MONTHS  ENDED  JUNE  30,  2010  AND  2009    (Unaudited)
                                                    Expressed  in  U.S.  dollars
                                      (Except  for  share  and  per  share  amounts)

                                                                                                            Six  Months  Ended
                                                                                            June  30,  2010          June  30,  2009
        OPERATING  ACTIVITIES
        Net  income                                                                  $16,046,107              $11,848,041
        Adjustments  to  reconcile  net  income
          to  net  cash  provided  by  operating
          activities:
        Depreciation                                                                  3,441,071                  1,852,357
        Amortization  of  intangible  assets                            927,048                      865,710
        Stock-based  compensation                                                        --                      183,600
        Loss  on  disposal  of  property  and
          equipment                                                                          320,957                        31,764
        Change  in  allowance  for  accounts
          receivable                                                                        267,716                      573,881
        Reversal  of  write-down  of  inventories                      (1,362)                              --
        Change  in  deferred  income  tax                                    215,192                      (29,517)
        Change  in  fair  value  of  contingent
          consideration                                                                (700,268)                              --
        Changes  in  operating  assets  and
          liabilities,  net  of  effects  of
          business  acquisitions:
        Decrease  in  restricted  cash                                        457,202                                --
        Increase  in  accounts  receivable                        (10,656,507)            (14,665,591)
        Decrease  /  (increase)  in  advances  to
          suppliers                                                                      2,091,453                (3,028,042)
        Decrease  /  (increase)  in  other
          receivables  and  prepaid  expenses                            313,302                (1,540,531)
        Increase  in  inventories                                        (10,164,333)              (1,657,773)
        (Decrease)  /  increase  in  accounts
          payable                                                                        (5,209,216)                4,643,442
        (Decrease)  /  increase  in  advances
          from  customers                                                              (695,808)                4,469,480
        Increase  in  amount  due  to  related
          parties                                                                          5,311,077                      177,621
        Increase  /  (decrease)  in  other
          payables  and  accrued  expenses                                  921,098                    (432,401)
        Increase  in  income  tax  payable                                  569,611                      695,912
        Net  cash  provided  by  operating
          activities                                                                    3,454,340                  3,987,953


        INVESTING  ACTIVITIES
        Increase  in  restricted  cash  related
          to  bank  borrowings                                                      (368,895)                            --
        Proceeds  from  sales  of  property  and
          equipment                                                                            44,007                      100,225
        Proceeds  from  sale  of  short-term
          investments                                                                                --                  5,862,800
        Refund  of  investment  in  former  Joint
          Venture                                                                                        --                  4,397,100
        Purchase  of  land-use-rights                                      (230,970)                              --
        Purchases  of  property  and  equipment                (11,038,575)                  (630,478)
        Capitalized  and  purchased  software
          development  costs                                                        (432,547)                  (308,484)
        Deposit  for  software  purchase                              (4,777,693)              (4,781,846)
        Deposit  for  purchase  of  land-use-
          rights                                                                              (165,093)                              --
        Net  cash  (used  in)  /  provided  by
          investing  activities                                            (16,969,766)                4,639,317


        FINANCING  ACTIVITIES
        Borrowing  of  short-term  loans                              21,003,299                  1,898,082
        Borrowing  of  long-term  loans                                  4,019,306                                --
        Repayment  of  short-term  loans                            (14,887,816)                  (732,850)
        Repayment  of  long-term  loans                                (1,906,970)                              --
        Issued  common  stock                                                    9,383,440                                --
        Repurchase  of  common  stock                                                    --                      (11,468)
        Net  cash  provided  by  financing
          activities                                                                  17,611,259                  1,153,764



                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                              CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
      FOR  THE  SIX  MONTHS  ENDED  JUNE  30,  2010  AND  2009  (CONTINUED)  (Unaudited)
                                                    Expressed  in  U.S.  dollars
                                      (Except  for  share  and  per  share  amounts)

                                                                                                              Six  Months  Ended
                                                                                                    June  30,                        June  30,
                                                                                                        2010                                2009
        Effect  of  exchange  rate  changes  on
          cash  and  cash  equivalents                                          170,806                            30,757

        NET  INCREASE  IN  CASH  AND  CASH  EQUIVALENTS        4,266,639                      9,811,791
        CASH  AND  CASH  EQUIVALENTS,  BEGINNING                13,478,633                      9,565,252
        CASH  AND  CASH  EQUIVALENTS,  ENDING                    $17,745,272                  $19,377,043

        Supplemental  disclosure  of  cash
          flow  information:
                                                                                                              Six  Months  Ended
                                                                                                    June  30,                      June  30,
                                                                                                      2010                                2009
        Cash  paid  during  the  period
                  Income  taxes                                                      $2,547,020                    $1,013,801
                  Interest  paid                                                        $449,494                        $117,327

        Supplemental  disclosure
          of  significant  non-cash
          transactions:

 

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