China Information Security Technology, Inc. Reports First Quarter 2009 Financial Results

    For more information, please contact:

    Company Contact
     Ms. Iris Yan
     Investor Relations Manager
     China Information Security Technology, Inc.
     Tel:   +86-755-8370-4767
     Email: iri@chinacpby.com
     Web:   http://www.chinacpby.com

    Investor Relations Contact:
    ICR:
     Michael Tieu
     Tel:   +86-10-6599-7960
     Email: michael.tieu@icrinc.com



                 CHINA INFORMATION SECURITY TECHNOLOGY, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  THREE MONTHS ENDED MARCH 31, 2009 AND 2008
                                 (Unaudited)

                                                Three Months     Three Months
                                                   Ended            Ended
                                                  March, 31       March, 31
                                                    2009             2008

    Revenue - Products                        $   2,821,128  $     4,543,473
    Revenue - Software                            9,011,466        4,989,734
                                                  2,955,457        4,553,657
    Revenue - System integration
    Revenue - Others                                192,133          317,562
    TOTAL REVENUE                                14,980,184       14,404,426

    Cost - Products sold                          2,612,791        3,929,535
    Cost - Software sold                          2,700,941        1,218,463
    Cost - System integration                     2,145,752        3,153,620
    Cost - Others                                    37,436           50,646
    TOTAL COST                                    7,496,920        8,352,264

    GROSS PROFIT                                  7,483,264        6,052,162

    Administrative expenses                      (2,216,347)      (1,752,735)
                                                                    (147,003)
    Research and development expenses              (503,852)
    Selling expenses                               (593,716)        (417,703)
    INCOME FROM OPERATIONS                        4,169,349        3,734,721

    Subsidy income                                  197,789           69,680
    Other income (expenses), net                    181,367             (279)
    Interest income                                  76,917           26,603
    Interest expense                                (60,210)              --
    INCOME BEFORE INCOME TAXES                    4,565,212        3,830,725

    Income tax expense                             (588,396)        (206,745)
    NET INCOME                                    3,976,816        3,623,980

    Less: Net income attributable to the
     non-controlling interest                      (219,823)                 (45,000)

        NET  INCOME  ATTRIBUTABLE  TO  THE  COMPANY                3,756,993                3,578,980

        Weighted  average  number  of  shares
        Basic                                                                                47,520,030              45,985,550
        Diluted                                                                            47,520,030              46,720,415

        Earnings  per  share  -  Basic  and  Diluted
        Basic  --  Net  income  attributable  to  the
          Company's  stockholders                                      $                0.08    $                    0.08
        Diluted  --  Net  income  attributable  to
          the  Company's  stockholders                              $                0.08    $                    0.08




                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                                        CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                                          MARCH  31,  2009  AND  DECEMBER  31,  2008


                                                                                                    March  31              December  31
                                                                                                          2009                      2008
        ASSETS                                                                              (Unaudited)
        CURRENT  ASSETS
        Cash  and  cash  equivalents                              $              7,034,395    $      9,565,252
        Short-term  investments                                                    5,860,000            5,835,838
        Accounts  receivable:
        Billed,  net  of  allowance  for  doubtful
          accounts  of  $736,564  and  $399,800,
          respectively                                                                    21,516,289          17,135,099
        Unbilled                                                                              24,461,082          25,722,009
        Bills  receivable                                                                              --            4,481,340
        Advances  to  suppliers                                                    10,459,121            8,469,976
        Amount  due  from  related  parties,  net  of
          allowance  for  doubtful  accounts  of
          $73,000                                                                                      69,480                131,594
        Inventories                                                                        12,626,465            7,107,537
        Other  receivables  and  prepaid  expenses                    6,229,554            6,251,484
        Deferred  tax  assets                                                              259,490                          --
        TOTAL  CURRENT  ASSETS                                                      88,515,876          84,700,129

        Deposit  for  software  purchase                                          717,704                          --
        Long-term  investments                                                      3,091,150            3,078,405
        Property  and  equipment,  net                                        22,946,191          23,555,603
        Intangible  assets,  net                                                  12,882,695          13,115,151
        Goodwill                                                                              23,778,000          24,018,894
        TOTAL  ASSETS                                                        $          151,931,616    $  148,468,182

        LIABILITIES  AND  EQUITY
        CURRENT  LIABILITIES
        Short-term  bank  loans                                      $              6,332,000    $      6,327,992
        Accounts  payable                                                              11,377,692          10,707,728
        Advances  from  customers                                                  1,781,770            2,476,335
        Amount  due  to  related  parties                                          495,621                486,136
        Accrued  payroll  and  benefits                                            744,829            1,319,386
        Other  payables  and  accrued  expenses                          2,021,148            2,553,019
        Income  tax  payable                                                            1,572,739            1,592,459
        TOTAL  CURRENT  LIABILITIES                                            24,325,799          25,463,055

        EQUITY
        China  Information  Security  Technology,
          Inc.  equity
        Common  stocks,  par  $0.01;  authorized
          capital,200,000,000  shares;  Shares
          issued  and  outstanding  2009:  48,803,211
          and  2008:  47,462,404  shares  respectively)                222,529                209,121
        Treasury  stock,  6000  shares,  at  cost                            (11,468)                        --
        Additional  paid-in  capital                                          64,297,531          64,127,339
        Reserve                                                                                  4,964,597            4,964,597
        Retained  earnings                                                            37,505,473          33,748,480
        Accumulated  other  comprehensive  income                    6,499,985            6,048,243
        Total  stockholders'  equity  of  the
          Company                                                                            113,478,647        109,097,780
        Non-controlling  interest                                              14,127,170          13,907,347
          Total  equity                                                                  127,605,817        123,005,127

        TOTAL  LIABILITIES  AND  EQUITY                        $          151,931,616    $  148,468,182



                                  CHINA  INFORMATION  SECURITY  TECHNOLOGY,  INC.
                              CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                                    THREE  MONTHS  ENDED  MARCH  31,  2009  AND  2008
                                                                  (Unaudited)

                                                                                                            Three                    Three
                                                                                                          Months                  Months
                                                                                                            Ended                    Ended
                                                                                                        March  31,            March  31,
                                                                                                            2009                      2008

        OPERATING  ACTIVITIES
        Net  income                                                                      $    3,976,816    $      3,623,980
        Adjustments  to  reconcile  net  income  to  net
          cash  used  in  operating  activities:
        Depreciation                                                                            915,105                657,678
        Amortization  of  intangible  assets                                  428,006                217,854
        Stock-based  compensation  (Note  14)                                183,600                383,965
        Loss  on  disposal  of  property  and  equipment                    8,329                          --
        Provisions  for  losses  on  accounts  receivable            335,129                          --
        Deferred  Taxes                                                                        (18,597)
        Changes  in  operating  assets  and  liabilities,
          net  of  effects  of  business  acquisitions:
        Increase  in  inventories                                                (5,489,875)            (590,698)
        Increase  in  accounts  receivable                                (3,278,151)        (5,648,740)
        Decrease  in  bills  receivable                                        4,488,480                          --
        Increase  in  other  receivables,  advances  to
          suppliers  and  prepaid  expenses                                (1,883,282)        (2,738,826)
        Decrease  in  amount  due  from  related  parties                62,663                          --
        Increase  in  amount  due  to  related  parties                      7,472                          --
        Increase  (decrease)  in  accounts  payable                      625,672              (303,819)
        Decrease  in  advances  from  customers                            (704,867)        (1,024,711)
        (Decrease)  increase  in  other  payables  and
          accrued  expenses                                                            (1,119,926)              439,039
        (Decrease)  increase  in  income  tax  payable                  (26,316)                70,142
        Net  cash  used  in  operating  activities                $  (1,489,742)  $    (4,914,136)

        INVESTING  ACTIVITIES
        Cash  acquired  in  Bocom  acquisition                                          --                713,793
        Proceeds  from  sales  of  marketable  securities                      --          14,966,752
        Proceeds  from  sales  of  property  and  equipment            21,068                          --
        Purchases  of  property  and  equipment                            (231,528)            (337,212)
        Capitalized  and  purchased  software
          development  costs                                                              (147,588)              (67,292)
        Deposit  for  acquisition  of  Geo                                                  --          (6,909,279)
        Deposit  for  software  purchase                                        (717,752)                        --
        Decrease  in  Goodwill                                                            240,910                          --
        Allowance  for  deferred  tax  assets  related
          to  Geo's  acquisition                                                        (240,910)
        Net  cash  used  in  investing  activities                    (1,075,800)          8,366,762

        FINANCING  ACTIVITIES
        Repurchase  of  common  stock                                                (11,468)                        --
        Net  cash  used  in  financing  activities                          (11,468)                        --

        Effect  of  exchange  rate  changes  on  cash  and
          cash  equivalent                                                                      46,153                416,964
        NET  (DECREASE)  INCREASE  IN  CASH  AND  CASH
          EQUIVALENTS                                                                      (2,530,857)          3,869,590

        CASH  AND  CASH  EQUIVALENTS,  BEGINNING                        9,565,252          19,755,182
        CASH  AND  CASH  EQUIVALENTS,  ENDING
                                                                                                  $    7,034,395    $    23,624,772
 

Web site: http://www.chinacpby.com/



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